Your complete guide to car loans

Rapid Finance on 20 July 2016

With the exception of your home, a new car is likely to be one of the larger purchases you make.

Therefore, while it is easy to get swept up in the excitement, it is important to take a step back and to consider all of your options. The choices you make now could have a big impact in the future.

This is especially true when it comes to car finance. A higher rate or lesser loan flexibility, for example, could end up costing you a lot in the long term.

With that in mind, here is your 20 point car loan checklist. Bookmark this article for all your frequently asked car loan questions, as well as general information on car finance.

The essentials

1. What is a car loan and how do they work?

In simplest terms, a car loan is a finance product whereby a lender provides funds to a borrower for the purpose of purchasing a car. The borrower then repays the borrowed amount in increments over the course of a loan term. The lender makes a profit from the interest charged on the loan.

2. Who can get a car loan?

There are no hard and fast rules regarding who can and who can not get a car loan. Provided you meet the legal requirements, then you may eligible for car finance. That said, lenders can and will approve or deny your car loan application depending your credit history and financial position.

3. How does a secured car loan work?

Secured car loans are one of the most common types of car finance. With a secured car loan, your vehicle is considered 'security' on the loan. In other words, if you default on your repayments, then the lender will repossess your car. They will then sell it to cover some or all of the amount borrowed. Your lender will also pursue any debt which is still outstanding after the sale of your car.

4. When can I get a car loan?

This will depend entirely on your situation, your lender and the amount you wish to borrow. If you're in a good financial position, then you could potentially get a car loan within 1 - 2 working days. If your situation is complicated, then it will take longer. Speak to a loan specialist for an estimate tailored for you.

5. Where can I get a car loan?

Car loans are available from a range of Australian institutions, including the big banks, smaller lenders, and credit unions. Many car dealerships also offer dealer finance. Another option is a car finance broker. A broker will seek out and compare a range of loans on your behalf to find a suitable loan solution.

6. Why get a car loan?

With a car loan, you get a new car without having to pay the full cost upfront. This is the main benefit of car finance, however, there are others. For example, meeting financial obligations (such as a car loan) can help you to build a good credit history. A car loan can also be used to cover registration and on-road costs.

 "With the exception of your home, a new car is likely to be one of the larger purchases you make."

Car loans in depth

7. What are the different types of car loans?

In Australia, there are six common types of car loans.

Each is designed for different circumstances and loan requirements. Depending on your situation and credit history, one or the other may be more suitable for you.

 For individualsFor businessesFor individuals and businesses

Secured car loan


Bad credit car loan


Commercial hire purchase


Chattel mortgage


Finance lease


Novated lease


8. What do lenders look at when applying for a car loan?

Lenders will assess your ability to repay the amount borrowed. That means looking at your credit history, income, and overall financial position (debt, savings, etc).

Essentially, they'll be looking for evidence of your capacity to meet financial commitments without default or difficulty and to determine whether or not a particular loan is "not unsuitable" for you.

9. How can I get my car loan approved?

You can increase your chances of loan success by demonstrating financial stability. This means securing a regular income, minimising debt, and consistently meeting financial commitments. The more you can show your capacity to repay your loan without difficulty, the more likely your application is to be approved.

 "Bookmark this article for all your frequently asked car loan questions"

negotiating with lenders on phone

10. When should I negotiate for a better car loan interest rate?

It pays to shop around. There are a range of lenders and financial products available in Australia today.

If you're unhappy with the rate you've been offered, then you can look elsewhere. Do so, and you may find a lower rate or a loan with features more suited to your circumstances.

11. How do secured car loans compare to personal loans?

In some situations borrowers may choose a personal loan instead of a traditional car loan. A personal loan is similar to a car loan, however, with a number of different features. Here's how they compare.

Car loanPersonal loan

Tailored specifically to car finance

Can be used for multiple purposes

Secured by the vehicle you buy

Car may not be used as security

Typically lower interest rate

Typically higher interest rate

Loan must be paid out if car is sold

Car can be sold without paying loan out

Easier to get with bad credit

More difficult to obtain with bad credit

12. How long does it take for my car loan to be approved?

Approval could take as little as 1 - 2 days, provided you are in a good financial position. Ultimately, though, the answer will depend on your circumstances, your lender, and the amount you wish to borrow. The more complex your situation and application, the longer approval will generally take.

13. How much can I borrow for a car loan?

How much you can borrow, also defined as your 'borrowing power' will depend on your circumstances. Everything from your income to your residential situation to your credit history can affect the amount a lender will allow you to borrow. For a free guide to your potential borrowing power, check out the borrowing power calculator.

holden astra variant models

Your borrowing power can mean the difference between a base model and a premium sports pack.

14. Fixed vs. variable. What is the right choice?

Most lenders only offer fixed rate car loans. However, some do offer variable rate options. Whether a fixed rate loan is right for you, will depend on your situation. Here's how fixed and variable rate loans compare.

Fixed rate car loanVariable rate car loan

Always know what you'll pay

Lower/higher interest rates could reduce/increase costs in future

Budget stability

Greater flexibility

Early repayment and break fees

Budgeting could be more difficult

Less exposure to rate increases

You could get a lower rate in future

Bad credit car loans

bad credit talking on phone application15. Can I get a car loan with bad credit?

Getting a car loan with bad credit can be difficult, but it may be possible. While some lenders will run at the mention of bad credit, others may be more understanding. That said, depending on your credit history, your loan options may be more limited or you may have to pay a higher rate.

16. What are bad credit loan interest rates?

The exact interest rate available to you will depend on a variety of factors. These factors include your credit history, income, residential situation, and the amount you want to borrow. Typically, however, bad credit car loan interest rates are above 10% p.a.

17. Can I get a car loan on Centrelink payments?

Potentially, yes. Not all Centrelink payments are assessed equally, so approval may depend on the payment you are receiving, as well as other sources of income. For example, if your income is derived solely from Centrelink, then you may find it more difficult to get a car loan than if you had a supplementary income.

 "Getting a car loan with bad credit can be difficult, but it may be possible."

18. How can I get a no credit check car loan?

In Australia, it is not possible to get a car loan without a credit check. As part of the National Consumer Credit Protection Act, a lender must make sure that finance is appropriate for an applicant. A credit check is an essential part of this process, therefore, it cannot be skipped or waived.

19. When can I apply for a better car loan interest rate?

This will depend on your credit history and your circumstances. To give yourself the best chance at getting a better interest rate in the future, stabilise your finances now, minimise your debt, and focus on meeting all financial commitments. You need to show lenders that your past financial difficulties are behind you.

looking at finance documents budgetting

Start managing your finances today with a household budget.

20. Where can I get a bad credit loan?

Not all lenders will offer you a bad credit car loan. However, some may. To get a second-chance loan, start by doing your research, seek out institutions that specialise in bad credit loans. Alternatively, speak with a loan specialist, they may be able to connect you with a bad credit car loan.

Bonus points: car finance brokers

21. What is a car finance broker?

Car finance brokers, such as the team at Rapid Finance, are specialists in car loans. They work every day to connect borrowers with lenders and finance options that match borrower needs and circumstances. They have an extensive knowledge of car loans and can tailor car finance solutions to suit individual situations.

22. Why use a car finance broker?

A car finance broker can connect you with loan options of which you may not have been previously aware. They can help you to build your case for finance to give you the best chance of loan success. They may even be able to help you to find a loan with a lower rate, more features, or greater flexibility.

Ready to apply? Speak with a car loan specialist.

At Rapid Finance, we've been helping Australians find car finance for over 17 years, and we could help you too, even if you have a complicated credit history.

Our car loan specialists compare a range of finance products from numerous lenders to seek out a loan solution that matches your needs and circumstances.

For more information, visit our car loans page today.