Why compare used car loans with Money
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How to get the best used car loan deal in 6 steps
1
Get a secured used car loan if you can
This is usually cheaper than getting an unsecured loan for a used car. Unless the car is very old, it should still be eligible for a secured car loan.
2
Negotiate the interest rate
Particularly if you have a good credit history, lenders may have wiggle room to offer a lower rate if you ask.
3
Get the shortest loan term you can
Our research shows the vast majority of borrowers request a five-year loan, but reducing the term by even one year on the same loan could mean paying around 20% less in interest.
4
Look for loan flexibility
In particular, second-hand car loans that allow you to pay off the loan early with no penalty can be a big money-saver.
5
Get pre-approval on your loan
This will mean you can go hunting for a used car knowing how much you can borrow. It also means you will be able to act fast if you find the ideal used car.
6
Check the fine print before applying
Some used car loans have an upper limit on car age. This is not something you want to discover after you've already found a used car and put down a holding deposit.
How do used car loans work?
Getting finance for a used car is very similar to getting a car loan for a brand new car.
In fact, it’s often the exact same kind of loan. That means a secured car loan where, in this case, the used car is the security. If you can’t repay the loan, the lender can reclaim and sell the car.
Most lenders will still accept used cars as security for a loan. Some lenders on our database will accept cars that are up to 15 years old. For other lenders we work with, the upper limit is lower e.g. 7 or 5 years.
If the car you're buying is not eligible for a secured used car loan, the alternative is an unsecured personal loan.
Some Australian lenders (such as Our Money Market) have no upper age limit on the age limit for their used car loans. If you get an unsecured loan, the vehicle’s age is also generally not considered.
Used car loan features
- Secured and unsecured options
- Loan terms of 1-7 years (most people choose five)
- Borrow up to $150,000
- Can be used for dealer or private sales
- Usually a fixed interest rate but there are variable options available
- Some lenders offer same-day approval
- Option to get pre-approval on your loan
- Establishment and ongoing fees can apply
- Balloon payment option typically available
Used car loans in Australia: What do people usually apply for?
Used car loans make up a significant proportion of the overall car finance market in Australia. In fact, more than 60% of all car loan requests made by Money.com.au customers are for a used car.
Our analysis also shows:
- The average used car loan amount requested is $32,528 for borrowers buying a car through a dealer, based on an average used car age of 6.1 years.
- For private sale car loans, the average is $26,396, with an average car age of 9.8 years.
- The majority of used car loans we analysed (55%) are for borrowers buying through a dealer.
What are the interest rates on used car loans?
For a secured used car loan, interest rates generally start from around 6% p.a.
For unsecured personal loans, rates are higher and generally start from around 8% but can be much higher in some cases.
The reality is your actual used car loan rate will be assessed by the lender based on your application. The main factors that affect used car loan rates can include.
- The age of the car: The older the car you’re buying, the higher the interest rate will be.
- The type of used car: The market for used electric vehicles in Australia is relatively small, but if you’re buying a used EV, you may qualify for a discounted rate on a ‘green’ used car loan. Westpac’s Electric Car Loan is one of the lowest rates available on eligible used cars up to seven years old.
- Where you're buying the car from: Some lenders offer lower rates on car loans for dealer-bought cars compared to private sale car loans as there is less risk for them.
- Your credit history: Borrowers with the highest credit scores qualify for the best rates.
- Your overall financial situation: In our experience, lenders take account of your income, expenses, existing debt levels, whether you own your home and your employment status.
Getting a second-hand car loan that’s even a couple of percentage points lower can make a big difference to your repayments. You can use our car loan calculator to see for yourself.
Don’t rely on ‘advertised’ rates on used car loans
Shaun McGowan, Loans Expert
A lot of the time you’ll see used car loan rates advertised that are identical to rates on brand new or demo cars. But this is typically a generic ‘starting from’ rate. Chances are the lender will take the age of the vehicle into account when calculating your actual rate. This is why you should compare personalised rates from multiple lenders before deciding.
Shaun McGowan, Loans Expert
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Comparing used car finance: dealer versus lender
Car dealers will generally offer car finance to you as part of the sales process. This can be convenient, BUT you could end up paying a premium for that convenience factor.
Moneysmart.gov.au warns: “It's important to look at loans before you go to a car dealership. You'll be able to negotiate better, as you'll know exactly how much you can spend, the best interest rate you can get, and how much your repayments will be.”
This is where getting car loan pre-approval can be important.
Before making any decisions, here are some questions to ask:
Is there an introductory interest rate on the loan?
These 0% or 1% finance offers can make the finance cheap to start off with but more expensive in the long run.
What commissions and fees does the dealer charge?
Always ask to see the rate you'll actually be paying with all applicable costs included.
What’s the term of the loan?
Repayments can be low on finance with a long term but you’ll pay more interest overall compared to a short term.
Is the dealer offering you any sweeteners?
For example, some may offer a small discount on the purchase price. Be wary of this as the discount could be easily wiped out by the cost of your finance.
Top-selling used cars in Australia
Australians bought more than two million used cars in 2023. These were the top-sellers, according to the Australian Automotive Dealer Association.
1
Ford Ranger (65,810)
2
Toyota Hilux (62,086)
3
Toyota Corolla (49,032)
4
Mazda 3 (42,238)
5
Hyundai i30 (43,158)
6
Toyota Camry (38,892)
7
Holden Commodore (36,825)
8
Mitsubishi Triton (36,387)
9
Nissan Navara (35,121)
10
Toyota Landcruiser (31,786)
