When purchasing a car, people often find the car first, then go looking for car loans. The truth is… it is better to do it the other way around. It’ll allow you to negotiate better and know your limit.

Here are 7 factors that will influence your car loan interest rates:

The age of car you’re purchasing

The best car loan rates from lenders are usually reserved for the newest cars. They have less mechanical risk and we, the owners, tend to take better care of them.

The older the car, the more likely you’ll pay a higher interest rate. And when a car gets beyond about 10 years old, it’s unlikely you’ll be able to use a secured car loan, it’s most likely you’d get a better rate from a personal loan.

Where you purchase the car from

If you’re buying a new car, it’s most likely you’re buying it from a Franchised Dealer, ie Hyundai. In the lens of the lenders, these are very reputable and safe, in comparison to buying a car from a private seller.

When you are purchasing privately, you do not have the same consumer guarantees and therefore, it’s a little riskier. 

Where you get car finance from

Amazingly, around 90% of all car sales in Australia are financed. Of these, almost 40% are financed through a car dealer. The others are financed through banks, car finance brokers and personal loan lenders.

Each has a different method of selling your finance and may charge you slightly differently; banks will typically have a higher interest rate than what a car finance broker will be able to get for you, but a broker is going to charge you a fee for arranging the loan.

Comparison Rates

Following on from above, to accurately work out the true cost of the car loan being offered, you need to work out the comparison rate. Each lender or finance broker can provide this to you. This comparison rate is the way you can include all the fees and charges and convert it into an interest rate. This allows you to see the lowest overall costs.


There is plenty of choice in the market for who to get a car loan with, which drives a lot of competition. Nowadays, there are lenders like NowFinance who offer fee free products. Be aware of car loans that charge big upfront fees and ongoing fees. Always do your research.

Your personal situation

Typically, you’ll need to be employed earning over $25,000 to be considered for a car loan and be able to demonstrate that you have the ability to repay the loan.

Lenders would like to see some stability across your employment and your living situation. 

Your credit history

Your credit score and history may play a big contributing factor to the interest rate you are offered. Lenders tend to have a minimum score they require and generally the higher your score, the less interest rate you’ll be asked to pay. In addition to the credit score, with positive credit reporting, lenders like to ensure you have been meeting all your obligations. For example; paying your gas and electricity bills on time, to meeting any credit card repayments. You can get a free copy of your credit file from Get Credit Score or Credit Simple.

So there you go, there’s a lot of different reasons as to why we may pay more than the next person. Of course, before you commit to anything financial, speak to an expert.

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  • These are all great tips and also a big eye opener. I didn’t realise this actually happens. I’ve always bought my car from the same dealership and have never had any problems with finance. It’s good to know for my next car (if I get one).


  • I don’t like to waste money so I only buy a car now when I can afford it outright with cash. No loan required.

    • Good money management is always so essential.


  • I would have thought all rates would have been the same for the same type of loan?


  • A big must for us is to always have a budget for any purchase.


  • I hage the idea of getting a car loan. My grandfather has always taught me to only get a loan for an investment, which a car is not.


  • Very informative article. Have never had a car loan as I’ve always saved up to purchase one when I have bought a car. But I am a wiser purchaser now after your article. Thanks so much for sharing.


  • never had to get a car loan but good article


  • I’ve found in the past that taking out a personal loan works out better than a car loan, but it pays to shop around for the best deal.


  • A car loan is a big no no to me.


  • Always do your own research before signing any loan


  • You’re also best shopping around if the dealer doesn’t give you the best rate straight up. That’s what I did and I got a much better deal.


  • Nice info


  • We’ve never bought a car with a loan, it’s not what we want

    • We simply buy a car when we have the money, or we don’t. Much comes down to budgeting and saving ahead


  • I have never taken a car loan and don’t think i ever will! It’s such a waste of interest repayments that can often be more expensive than a mortgage.


  • When you have parents who are really into finance they usually advise not to buy anything unless you can afford to pay it in full (but not applying to a house) so we always just save before we buy a car just to skip all the fees!


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