10 July 2026 | See disclaimer
Buying a car is a big financial commitment to make. While it’s exciting to drive away in a new car, depending on your financial situation, paying the price in full may not be feasible. You not only need to think about securing the safety of your car with insurance, but you also need to consider securing the right financing too.
For many, this means taking out a car loan and borrowing money from a lender that you repay over time, with interest. And with shifting interest rates in 2026, researching and selecting the right loan is crucial so you don’t pay too much interest.
Even with the current unpredictable interest rates, the appetite for car loans is only growing stronger. A recent Australian Bureau of Statistics lending indicators report shows personal lending in Australia reached $9.4 billion in the December quarter of 2025, with a 11.6% increase within a year. This demonstrates an increase in consumer demand with road vehicle loans totalling to $4.7 billion in the same quarter. [1]
How to Apply for a Car Loan
If you’re looking to apply for a car loan, this guide will give you an actionable checklist.
For specific personal advice on securing a car loan, it’s advisable to consult a broker or financial professional.
Step 1: Check Your Credit Score
Firstly, it’s worth checking your credit history before you apply for a car loan so you can view your score.
Car loan lenders will look at your credit rating before they decide to lend you money. All credit reports will show your personal and financial information, which includes your rating, and reveals if your score is low, fair, good, very good or excellent. [2] If you have a high score, this will let lenders know you’re a low-risk borrower and are more likely to receive a loan than someone who has a low credit score.
To access your free credit report, you can reach out to agencies such as Experian and Equifax to request it. You can access a free copy every 3 months; a fee is charged if you request this sooner. [2]
Step 2: Calculate Your Budget
Before signing on the dotted line, you can use a repayment calculator to estimate your weekly repayment amount. You’ll need to accurately put in the loan amount, vehicle purchase price, the interest rate and loan term to receive an estimated figure. [3] This will give you a fair idea of what your instalments might look like.
Rather than focusing on the maximum amount you can borrow, consider what you can comfortably repay each week on top of your existing expenses.
Step 3: Gather Your Documents
It’s also best to organise the documents you’ll need to secure financing by arranging these into one folder. This includes proof of identification, income and debts, including your: [4]
- Current Australian driver’s licence
- Passport
- Medicare card
- Recent pay slips
- Proof of employment
- Vehicle make, model and registration number
- Information about any other loans you have (including credit cards)
Step 4: Submit Your Application
The final step to buying your new car is submitting your car loan application. Depending on your lender, you may be able to apply online, over the phone or in person.
Check the history of your car
If you’re buying a second-hand car, it’s important to check the history. Make sure it doesn’t have money owing on it and isn’t stolen or written-off with our Personal Property Securities Register free car check.
Car Loan Types
Choosing a manageable loan that doesn’t negatively affect your financial stability is essential, which is why it’s important to understand what loans are available before you make any final decisions.
Secured Car Loan vs. Unsecured Personal Loan
The difference between choosing a secured or unsecured personal loan can affect your car repayments.
A secured car loan can be cheaper to pay off, but it requires collateral. This means the lender may choose to repossess your car if you can’t repay the loan. This provides the lender with more security if you can’t pay within the agreed timeframe.
On the other hand, unsecured personal loans usually have a higher interest rate, but don’t require collateral. Instead, the lender relies on your credit score and history, providing a loan they believe you can pay back efficiently. [5]
Fixed Interest Rate vs. Variable Rate Loan
You’ll also need to choose between a fixed interest rate or a variable rate loan for your monthly repayments.
With fixed rate loans, your repayments stay the same regardless of any interest rate changes, offering certainty. However, a variable rate is influenced by the Reserve Bank of Australia’s cash rate. This means your interest rate and your repayment amount can go up or down throughout the life of your loan. [6]
If you want to pay off your loan with extra repayments in the future, a variable rate may be more suitable for you. This option usually doesn’t have an early exit fee attached and offers more loan flexibility. [6]
Cost of Borrowing
When choosing a lender, it’s also important to know the different options available to you.
Interest Rate vs. Comparison Rate
Knowing the difference between an interest rate and a comparison rate can help you make a well-informed decision.
In contrast to the advertised interest rate, the comparison rate shows the actual cost including the rate, fees and charges relating to the loan, which provides customers with a more accurate figure. [7] You can compare interest and comparison rates on sites such as savings.com.au with car loans from Australian car loan lenders available.
Comparing Lenders
Sometimes, convenience can outweigh the costs. But when it comes to choosing a car loan provider, we recommend doing your research to avoid having to pay higher fees later.
Banks, Credit Unions, and Online Lenders
Securing a car loan with a bank, credit union or an online lender is more competitive and typically comes with extra flexibility compared to a dealership loan.
With these types of lenders, borrowers can usually make additional repayments with no extra charges and choose whether they want a fixed or variable loan rate. [8] If you choose a financial institution for your loan, it can be worthwhile to get pre-approval first before heading into a dealership, which can take you up to a few days to get. This can help you set a realistic budget and focus only on vehicles you can afford.
Car Dealership Finance
Car dealers, on the other hand, may offer low interest rates but may have higher upfront and ongoing fees. However, the upside to financing through a dealership is that you can walk in, select a car and do the paperwork for your finance all in one place. [8]
Buying Your Vehicle
Keep in mind the car you purchase can play a big role in the type of loan and lenders available. The car market in 2026 has many opportunities and challenges, which is why it’s important to know which cars can affect a loan’s conditions and costs.
New or Used Car?
Are you considering buying a new or used car? Depending on the car you want to buy and the lender you choose, the age of the vehicle may affect the terms of your car loan.
New cars are considered a lower risk for lenders, as the re-sale value of the vehicle is strong, meaning you’re likely to receive a lower rate.
However, the terms and rates of a car loan can look different for everyone, as loans are tailored to the individual applicant and the vehicle they wish to purchase. [9]
Green Loans for Electric and Hybrid Vehicles
If you’re thinking about purchasing an electric or hybrid car, you might be able to secure a green car loan, which encourages drivers to purchase eco-friendly vehicles in exchange for a cheaper loan. You can compare and find lower rates on Finder.com.au.
Protecting Your Investment
After investing time and money into finding the right loan, it’s also important that you explore protecting your investment with comprehensive car insurance.
Why Lenders Require Comprehensive Car Insurance for Secured Loans
Most lenders who offer secured loans are likely to require you to take out Comprehensive Car Insurance to protect their collateral in case of a total loss. [10] Even if it’s not a requirement from your lender, having comprehensive insurance can also protect you in case an accident occurs.
Quote First with Budget Direct Car Insurance
Getting Car Insurance on the day you purchase your car can offer protection for your new car as the new owner. Save 15%^ when you get a car insurance policy online on your first year’s premium.
Frequently Asked Questions
What proof do you need to get a loan?
To get a loan, you will need to prepare documents to show your finances, employment and identity to a lender. This includes the 100 points of ID, including your Australian passport, driver’s licence and Medicare card. To show proof of your finances and employment, you’ll need to have two to three recent pay slips and either your employment contract or your employer’s contact information on hand. If you secure the loan outside of a dealership, you will also need to provide the lender with your new vehicle’s make, model, registration number and price of the car. We also recommend bringing along official proof of any other assets you own or current loans you have.
Can I get a loan for a used car from a private seller?
Yes, you can get a loan for a used car purchased through a private seller. Although this may limit some of your lender options, this is still possible. The lender will transfer the funds that are needed to the private seller so the purchase can be finalised. After this is completed, you’ll be required to start paying off the loan. [11]
What is a balloon payment?
A balloon payment is a one-off lump sum payment you can make towards your car loan, which is typically towards the end of the loan term, if you and your lender agree to it. Some balloon payments can be up to 50% of the car’s purchase price, which can help reduce the remainder of your loan repayments. [12] Although, if you forget or don’t have the total lump sum ready, this can come as a surprise.
