Compare new car loan interest rates

A new car loan is a type of personal loan that lets you finance a car that's under a certain age. New car loans are generally used to buy vehicles up to five years old, though some lenders limit the maximum vehicle age to three years.

When you take out a new car loan, the lender will provide the money you need as a lump sum. You'll then repay the loan amount, plus interest and fees, in regular instalments over a predetermined period (the loan term).

Weighing up the pros and cons of a new car loan can help you work out if it’s the right type of car finance for you.

New car loans are typically used to purchase brand-new vehicles from dealers and manufacturers, though you may also be able to buy a pre-owned car that’s under a maximum age cap, such as 2 or 3 years old.

Newer cars may offer advanced safety features and technology, and less wear and tear may mean a lower risk of mechanical problems. This can help a new car retain more of its value for longer, which could in turn potentially help you secure a lower interest rate compared to a used car loan.

On the other hand, new cars are often more expensive than used cars, and you may have to wait for the vehicle to be delivered if it's not in stock, which means living without a car for longer.

A higher purchase price could mean bigger repayments, a longer loan term, or both. To avoid any surprises, you could use a car loan repayment calculator to help you calculate your monthly repayments for various loan sizes and terms.

No single car loan rate or provider can be the best choice for everyone. Comparing car loans can help you narrow down your options to only those that best match your financial situation and personal needs.

Using comparison tools and Loan Repayment Calculators, you can filter a list of available car loans based on your specific goals and budget, to help you make your best new car loan choices. 

When you apply for a car loan, the lender will conduct a credit check. Your credit score helps lenders assess the potential risk of lending you money, which may affect the interest rate you’re offered. If your credit score has room to improve, it might be worth exploring ways to give it a boost before you apply.

Keep in mind that while buying a new car could mean borrowing more money, loans for new cars may have lower average interest rates than used car loans, meaning they may be competitive options.

New car loans and used car loans are similar in many respects. However, there are a few important differences between the two, including:

• Vehicle age restrictions: New car loans typically allow you to buy cars aged up to three or five years old, depending on the lender. Meanwhile, used car loans may allow you to buy cars up to 10 years old, with the age cap depending on the lender.
• Interest rates: Lenders typically consider new car loans to be less risky than used car loans, as it’s easier to calculate a new car’s value, and they’re less likely to break down and be written off. This means new car loans often offer lower interest rates than used car loans.
• Security: New car loans tend to be secured against the car itself, while used cars may need to meet certain age and condition criteria to be used as collateral. The main benefit of securing your car loan is that it will typically allow you to access lower interest rates.

If the new car you're considering purchasing is an electric, hybrid or fuel-efficient vehicle, you may qualify for a green car loan.

Green car loans have different vehicle eligibility criteria than new car loans. While a new car loan could be used to purchase almost any type of car that’s under the loan’s maximum age, green car loans can only be used to buy 'green' cars. 

A vehicle that has lower carbon dioxide emissions than other cars of a similar size could be considered a green car. This may include:

• Low-emissions vehicles
• Battery electric vehicles
• Hybrid electric vehicles
• Plug-in hybrid electric vehicles
• Certain new cars with a high standard of fuel efficiency

Buyers may want to consider a green car as they typically come with lower interest rates. Lenders may try to incentivise customers to purchase environmentally-friendly vehicles by offering more competitive interest rates. 

Certain new cars may meet the eligibility criteria for both a new car loan and a green car loan, but there are also plenty of vehicles that may only meet the conditions of one or the other. Comparing green car loans and new car loans could help you to work out which option may suit your financial situation and personal goals.  

Ask the lender for information about how it determines a particular loan's purpose to be ‘green’ and how it contributes to environmental sustainability.

When searching for a new car loan, it’s important to remember that no single car loan or provider can be the best choice for everyone. Understanding the various factors that affect your car loan could help you make an informed choice.

Some of the most important options to compare when choosing a new car loan include:

Secured vs unsecured loan

New car loans are commonly secured by the value of the car itself. Alternatively, you could buy a new car with an unsecured personal loan, but the interest rate will likely be higher.

Interest rates

The loan's interest rate will determine how much you pay in interest charges. Fixed interest rates will stay the same throughout the life of the loan, while variable interest rates can fluctuate with the market.

The car loan interest rate you’re offered will depend on a range of factors, including your credit score.

Fees

You may be charged upfront and ongoing fees as well as your interest payments, such as: 

• Loan application fees
• Establishment fees
• Monthly fees
• Late payment fees
• Early repayment fees
• Exit fees

Comparison rates

Combining a car loan’s interest rate with any standard fees, the comparison rate can give you a better idea of its total cost. Keep in mind that there may still be extra fees or value-adding features to consider when comparing car loans.

Extra features

Some lenders offer additional features that may appeal to you, such as the option to make extra repayments to pay off your car loan faster, and a redraw facility that lets you withdraw any of these additional repayments you've made if you need to.

Loan term

The length of time you have to pay off your car loan. Car loans often have three to five year terms, but sometimes longer or shorter terms are available. The longer the loan term, the cheaper the repayments, but the more you'll likely pay in interest.

Real Time Ratings™

One quick and simple way to get a better idea of the potential value that different car loans offer is to look at their Real Time Ratings™. These star ratings combine the cost (e.g. interest, fees etc.) and flexibility (e.g. approval/funding time, extra repayments, redraw and early exit penalties) of each car loan, and are updated regularly to ensure improved accuracy.

Remember to take your time to compare various options and choose a loan you’re comfortable with. A car loan calculator can help you determine your monthly repayments for different loan sizes and interest rates. This may help you decide on a reasonable budget for your new car, so you can enjoy driving without financial stress.

There are a wide variety of car finance options available, which may better suit different borrowers, depending on what vehicle is being purchased, and if it’s for work or personal use. 

These include:

• Secured Car Loans: Car finance where you provide collateral, typically the car itself. May offer lower rates, but you risk losing the collateral if you don't make your repayments.
• Unsecured Car Loans: Car finance where you don’t provide collateral. May be more flexible, but interest rates may be higher. 
• Chattel Mortgage: A specialist car finance option for business use.
• Operating Lease: More like a long-term car rental arrangement, involving a company leasing a car for an extended period.
• Commercial Hire Purchase: Closer to a rent-to-buy arrangement, involving a finance company buying a car on your behalf and letting you use it in return for regular rental payments. After a certain number of payments, you may own the car.
• Car Lease: Like a commercial hire purchase, but with more options. You rent the vehicle for a set period, and at the end of the lease you have the option to either return the car or buy it for an agreed amount.
• Novated Lease: Like a car lease, but with a more complex ownership structure, as you acquire the car from one party (usually an employer), which leases it from another party (a finance company).

You may also be able to add a Balloon Payment to some of these car finance options. This is where at the start of the term, you set aside a percentage of the loan (often around 25%, but could range from 15% to 50%) as the ‘balloon’, then make smaller repayments on the remainder of the car loan. At the end of the loan term, you can choose to pay the balloon as a lump sum, or refinance the balloon, which could let you upgrade your vehicle.   

Refinancing a car loan simply means switching from one car loan to another, usually with a different lender. Refinancing could let you enjoy cheaper interest rates, lower fees, or flexible payment options to help you pay off your car loan sooner and save some money.

If you have a car loan with a balloon payment, you may choose to refinance the balloon amount at the end of the loan term rather than paying it as a lump sum. This lets you pay it off in smaller instalments over time, though it may cost you more in total interest. In some cases, you may also have the option to trade in and upgrade your car when you refinance the balloon.  

Refinancing a new car loan is a fairly simple process, similar to applying for a new car loan: 

• A borrower with an existing car loan applies for a new car loan that they’ve selected;
• Once approved, they use that money to pay off the initial car loan with their current lender;
• Then they start making repayments on the new loan.

Keep in mind that if you’ve been driving your new car for some time, it may no longer qualify for a new car loan when you refinance – you may need to switch to a used car loan instead, which may not always offer better rates or more flexible features.

If you're considering refinancing your car loan, do your research, compare your options, and consider any early exit fees or establishment fees you may incur by switching from one lender to another. 

Consider using RateCity's switch and save car loan calculator to get an idea of how much the monthly repayments might cost on a new loan with a different interest rate. You might also like to visit our credit score hub to check your credit history and ensure it's in good shape before applying for a new loan.