Prices of both new and used vehicles have increased significantly in the last couple of years, meaning it’s even more important to understand all your car finance options so that you can make the right decision for your specific situation.
According to the latest figures, approximately 90% of all car sales in Australia involve finance — so you’re certainly not alone in searching for the best car loan! Read on to find out nearly everything you need to know about financing a used or new car in Australia, as well as tips to help you get your finance approved quickly.
New car loans
Most lenders in the Australian car loan market will approve new car finance if you meet their eligibility criteria. When assessing a finance application, the primary concern of any lender is that you can afford (and will make) your loan repayments, in accordance with their loan agreement.
Most car finance arrangements in Australia are secured car loans. This means that the car is the security for the loan. If you don’t make your monthly payment, the lender may be able to legally repossess and sell your car to recover the amount you owe. The lender registers their interest in the vehicle on the Personal Property Securities Register until the loan is fully repaid.
You will usually have to take out comprehensive car insurance to get your loan application approved.
Used car loan
Not all lenders in the Australian car loan market will approve finance for used cars. Those that do will usually have restrictions on how old the car can be, and how much they are prepared to lend. That’s because cars lose their value over time.
Those lenders that do approve these loans will also usually require you to take out comprehensive car insurance as a condition of approval.
Applying for new or used car finance
When you’re applying for car finance, you need to supply identification as well as at least three documents such as:
bank statements for your everyday account and any other accounts in your name for the last three months (or for at least six months if you’re running a business and wanting finance for a business vehicle).
proof of your income (such as recent payslips or a statement from your employer).
a lender’s completed application form. This form will usually include a budget of your regular income and expenses to demonstrate that you can afford your repayments.
Many lenders will also require a statement of all your assets and liabilities, as well as details of the car you want to buy (such as make, model and registration number).
Credit reporting agencies compile a credit score (also called a credit rating) based on your credit history, which lenders will check when you apply for any finance. If you’ve had trouble making your credit repayments on time in the past, it may affect your score. And if you’ve never had any credit before, you probably won’t even have a credit score!
Your credit repayment history includes credit cards and loans, as well as mobile phone and utility accounts. Basically, it’s any sort of agreement extended to you with credit terms. You can check your credit score online for free with credit reporting agencies like Experian. Any score below 550 is generally considered a bad credit score. If you have a bad (or no) score, it’s more likely that your car loan application will be declined, unless you use a lender who specialises in car loans for bad credit (like Finance One!).
It may also be harder to get approved with some lenders if you:
- Are self-employed.
- Have irregular income (for example, as a casual, contract or seasonal worker).
- Receive certain types of Centrelink payments (like Family Tax, Parenting or Carer Payments, as well as Aged, Disability and Veterans’ Pensions).
The bottom line
Financing a car is a big decision. It’s worthwhile getting independent professional advice to improve your chances of getting approved for a car loan, especially if you have a bad (or no) credit history.
How can we help?
At Finance One, we specialise in helping people with a bad credit rating get their car loans approved. We also help those who are self-employed or who have irregular or Centrelink income.
We can arrange finance for our car buying Consumer Loan clients ranging from $5,000 to $75,000*** for terms ranging from 3 to 7 years.
As long as you’re receiving regular income and you’re at least 18 years of age, you could be eligible to be approved for a loan within 48 hours*.
And if you’re running a business and you need to buy a vehicle like a ute, a van, a truck or a fleet of cars, you could be eligible for a Commercial Loan of between $8,000 and $125,000**, provided that you’re receiving regular business income, aged over 21 and have been operating for at least six months.
Contact us on 1800 346 663 to find out more about how we may be able to help.
FAQs for Financing a Car
What is financing a car?
Car financing means you are taking out a loan. The lender pays the seller upfront for the vehicle, and then you make monthly payments — usually including interest payments calculated with the interest rate — to the lender for an agreed-upon amount of time (called the loan term) until the loan is repaid, in accordance with your loan agreement.
How do interest rates work?
Your car loan will have either a fixed rate or variable rate.
Fixed rate car loans have the same interest rate for the duration of the loan. This means you know exactly how much your monthly repayments will be, which helps with budgeting.
Variable rate car loans have an interest rate that fluctuates with the market. If the interest rate goes up, your repayments will too, but you can enjoy cheaper car loan repayments if it goes down.
When you compare car loans, it’s important to keep the different types of interest rates in mind as well as features like the ability to repay the loan early or make a balloon payment.
Can you get a car loan with a bad credit score?
Yes, but it’s essential to apply to the right lender.
This is where car loans for bad credit can help.
Make sure you avoid applying to multiple lenders if you have a bad credit score because this may further lower your credit score.
Can you get a car loan with no credit history?
Yes, but again, it’s essential to apply with the right lender or financial institution.
Can I improve my credit score?
Yes, you may be able to improve your score by paying off all your overdue debts and by getting into the habit of making all your repayments on time in accordance with your loan agreement (including your car loan). You may also improve your score by reducing your number of credit cards.
All of these things may help you to improve your credit rating over time. When you do, you’ll likely find it easier to get approved for future loans with a bigger range of lenders.
Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information.
When applying for finance with Finance One, all normal lending criteria apply. Fees and charges are payable. Terms and conditions apply.
*48 hour approvals are subject to satisfactory documentation being provided to assess the application.
**Commercial Loans between $75,000 – $125,000 must be property backed.
***Consumer Loans between $50,000 – $75,000 must be asset backed.