Best Car Loan Guide – Picking The Right Loan

The best car loan for you will depend on your situation, as well as your objectives. If you aren’t sure how to compare different finance products, or even where to begin, read on. Welcome to the Monzi guide to picking the right car loan.

Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What is a car loan?

Most Australians will take out a car loan at some stage. In short, a car loan is a sum of money you borrow from a lender that covers the purchase of a vehicle.

Moreover, you will generally use the car you are purchasing as security. If you fail to make repayments, the lender may repossess your asset.

Finally, note that your repayments will cover principal, as well as any interest and other fees accrued.

Best car loan comparison

You shop around before buying a car, so, logically, you should shop around for a car loan too. Compare key features so you find the deal that works best for your circumstances.

Not sure what to look for? Consider the following:

  • Secured or unsecured?
  • Payday or personal loan?
  • What’s the interest rate?
  • What fees and charges will be applied?
  • How much can I borrow from this lender?
  • What will my repayments be and over what period?

How to choose the best car loan

As we mention, the ideal car loan for you will depend on your situation and objectives.

Moreover, just as consumers differ, so too do lenders. In other words, no two lenders are the same. Therefore, consider the following when comparing lenders.

Interest rate

Interest is what you repay on top of the principal. Moreover, interest is expressed as a percentage of the principal amount.

You may be able to get either fixed or variable interest rates. As their names suggest, fixed interest will remain the same throughout the life of your loan, while variable may fluctuate.What is a good rate for a car loan?

The interest rate that you are offered may be influenced by a number of factors. As a result, it is difficult for us to say what a competitive interest rate may be.

As a guide, lenders may consider the following factors to determine the interest rate on your loan:

  • Your credit history: bad credit loans often come with higher interest rates.
  • The amount you wish to borrow.
  • Secured or unsecured loans: securing a loan with your vehicle can help you access more competitive rates.

Best car loan fees and charges

Lenders will usually charge additional fees on top of the interest and principal.

  • Establishment fee. Lenders will often charge an establishment fee for setting up the loan. Establishment fees may range anywhere from $100 to $600, depending on the lender.
  • Ongoing fee. Also known as account keeping or administration fees. These monthly fees may range anywhere from $5 t $15, depending on the lender.

Repayment term

Depending on your lender, you may be able to choose between a longer or shorter repayment term. Both come with their own advantages and disadvantages.

A short repayment term may result in higher regular repayments. However, you may pay less overall interest.

On the other hand, a longer repayment term will result in lower contractual repayments. Obviously, loans are interest based, meaning you may pay more interest over the life of your loan.

In short, weigh up which options suits you best. Would you rather not compromise on your regular budget and pay more overall interest? Or would you prefer to be strict with your finances to pay your loan out as soon as possible?

Only you can answer this question.

For more information, head to the MoneySmart website.

Is it worth getting a car loan?

Financing your car is simply one option that can help you drive away in your new car today. However, Monzi cannot say if it is right for you.

While paying cash for your car when you purchase it allows you to avoid relying on a loan, often this is unrealistic. Cars are expensive, so having the required cash in your savings is not often possible.

As a result, it will ultimately come down to your unique financial situation. Consider your savings, income and the purchase price of your preferred vehicle. Subsequently, you can then decide if a car loan is right for you.

Best car loan woman in yellow shirt smiling holding keys in grey car

Apply with Monzi

While we may not be able to find you the best car loan in Australia, we may be able to match you with a lender offering personal loans. Let’s go.

Before you begin, make sure you meet our four eligibility criteria.

  • At least 18 years of age.
  • An Australian citizen or permanent resident.
  • Hold a current email address and mobile number.
  • Have an online bank account with at least three months of history.

Once you’re eligible, applying is simple. Just follow these steps:

  1. Select your loan amount and repayment period.
  2. Provide the required personal information.
  3. Take a break while we try to pair you with an available lender.
  4. We’ll be in touch with an outcome. If a lender is found, they will contact you to complete an assessment.

Can Monzi find me the best car loan in Australia?

Technically, we try to pair you with a lender who may or may not offer you money. Moreover, the lenders in our network may be able to offer personal loans. You can, in turn, use your personal loan to cover the cost of a vehicle.

The following loans may be on offer:

Personal loanTermSecured?
$300 to $2,000Up to 12 monthsNo
$2,001 to $4,60013 to 24 monthsYes
$5,000 to $10,00013 to 24 monthsYes

Bear in mind, your repayment terms may vary to what the table presents above. They may not reflect the best car loan for your situation.

In addition, note that the personal loans potentially available through Monzi’s panel of lenders may function differently to a normal car loan. Specifically, you may not be able to use the car you intend to purchase as security.

Instead, you must have an existing asset of adequate value.

Want more Monzi?

There is plenty more useful Monzi content out there for you. If you’re in the market for a vehicle, why not check out our guide on car loan interest rates? Alternatively, we have a lot of information on how new car loans work.

Finally, head over to our page on the best personal loan rates in Australia. Here, we explore how lenders determine interest. In addition, this article looks at how to put yourself in the best position.

Let’s go

Scroll up and begin your application now.

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Factor In

Costs

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You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000

Terms

12 months

Costs

20% upfront establishment fee

+ 4% monthly fee

Example

Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate

Loan amount

$2,001 - $4,600

Terms

13 months

24 months

Costs

48% annual percantage rate

67.41% comparison rate p.a.

Example

Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principle Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Interest Rate for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000

Terms

13 months

24 months

Costs

21.24% annual percantage rate

48% comparison rate p.a.

Example

Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principle Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Interest Rate for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.