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You don't have to spend big to get a bit of help buying your car.
Low interest rate car loans are available from banks, credit unions, brokers and dealers in the form of dealership finance. It pays to compare as you could save hundreds or even thousands of dollars.
What is the lowest car loan interest rate on Finder?
You'll receive a fixed rate from 6.89% p.a. depending on the lender you are approved with. Apply for up to $300,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
You won't be charged for clicking through to one of our car finance partners. We get paid out of their pocket – not yours.
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We've helped thousands of Australians find a car loan by keeping things simple and free of complicated jargon.
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Our side-by-side car loan comparison makes it easy to find a car loan that is a good fit.
What you should know about advertised low rates on car loans
If you see a low interest rate on a car loan, it’s not necessarily how much you'll end up paying.
Lenders will decide your final interest rate based on factors such as your credit score or the type of car you''re buying. Some rates may only apply to certain loan amounts or have other specific criteria you will need to meet.
This means if you're buying a car that is 2 years old and you only want to borrow $21,000, you may be paying a slightly higher interest rate than the one you saw advertised. In situations like this, it's also important to find out whether your car loan has a balloon payment option as this may help keep your repayments down.
How to find the right low interest rate car loan for you
When searching for a low interest rate car loan, you should consider:
The age of the car. This determines the type of low interest car loan you're eligible for. Some lenders will only lend to you if you are buying a new car, which is generally considered to be a car under 2 years old. Used cars can be up to 7 or 10 years old. Cars beyond that age may need to be bought with an unsecured personal loan.
The interest rate and loan term. Take the time to input your numbers into a good car loan repayment calculator to work out how much you would repay for various loan terms. You might pay less per month with a longer loan term, but ultimately you'll end up paying more.
Additional fees. Check to see if the loan has any upfront or ongoing fees as this will add to the cost of your low interest rate car loan.
The overall cost of repayments. It's important to consider more than just the monthly payments. Look for certain repayment structures (like residual payments) or how much additional interest you may end up paying over longer loan terms.
Simone wanted to borrow $25,000 to buy a new car but didn't want her repayments to go over $400 per month. She set her loan term to 5 years to keep her payments at $400 per month, but she would still have a $10,000 residual payment due at the end of the 5-year term.
She can choose to pay this by refinancing her car loan's outstanding balance with her current lender or a new lender and pay off the remainder over the next few years.
She also has the option to trade in her car and buy something else. If her car is worth around $15,000 when she goes to trade it in and buys something else for $25,000, she'll end up with a new car loan of $10,000 to repay.
* This is a fictional, but realistic, example.
Comparing 5- vs 7-year loan terms
Let's assume you want to borrow $20,000. Over a 5-year term you might be quoted an 8% p.a. interest rate, but you're offered a 7.5% p.a. rate if you accept a 7-year loan term.
Low interest loan details
Low option 1
Loan option 2
Loan Amount
$20,000
$20,000
Loan Term
5 years
7 years
Interest Rate
8%
7.5%
Monthly Repayment
$405.53
$306.77
Total Interest Paid
$4,331.80
$5,768.68
In this example, you're paying 8% p.a. on the 5-year loan term, so your repayments are $405.53 per month. You end up paying $4,331.80 in interest charges over 5 years.
By comparison, if you take the cheaper interest rate at 7.5% over a longer 7-year loan term, your repayments are almost $100 cheaper at $306.77 per month. This can be a very appealing option as it's obviously more budget-friendly. Unfortunately, even with the cheaper interest rate, you end up paying more than $1,436 in additional interest charges.
An option you have is making additional repayments and paying off your low interest rate car loan sooner while letting you take advantage of the cheaper interest rate. It's important that you check if you'll be charged an early repayment fee that wipes out any savings you thought you were getting.
Data: Average car loan interest rates over time (updated July 2023)
This chart shows the average comparison rate for all car loans within Finder's database. We selected the interest rate as the metric as this is merely for indicative purposes.
This data accounts only for interest rates advertised by lenders, which tend to be based on their offerings for individuals with a credit score of "Excellent". You may find the interest rates offered to you will be higher if you have a lower credit score.
What factors influence car loan interest rates?
The age of the car
As the lender will need to be able to recoup its losses by selling the vehicle if you default on a loan, a newer car is usually preferred. New car loans tend to attract lower rates than used car loans. "New cars" are vehicles under 2 years of age.
Whether the low rate car loan is secured or unsecured
A secured car loan is going to come at a cheaper interest rate than an unsecured loan. This is simply because the bank is able to use your car as security for a secured loan, meaning they can recoup the costs if you can't meet repayments.
Whether the interest rate is fixed or variable
Some banks offer both fixed rate car loans and variable rate car loans. The variable rate offered is usually cheaper than the fixed rate because it might fluctuate throughout the loan term.
The loan term
There are some lenders out there offering lower rates for longer loan terms. For example, if you agree to extend your loan term up to 7 years instead of taking out a 5-year loan, you could find that your interest rate drops a little. Don't automatically assume that a lower rate will mean a cheaper car loan. It's important to work out your total cost over the entire loan to be sure you're getting the best car loan deal.
Whether the loan is full-doc or low-doc
If your loan application shows that you have a stable employment history and you can show payslips to verify your income, you're likely to qualify for a low interest rate car loan. However, if you're self-employed and you can't verify your income with payslips or tax returns, it's likely you'll pay a slightly higher rate with a low-doc loan.
Your credit history
If you've seen a really low interest rate car loan advertised but you have a bad credit history, it's likely you won't qualify for those really good rates. Your cheap car loan search will usually be limited to lenders that offer bad credit products.
If the loan comes with additional features
Some lenders will include extras on top of your loan repayment. These might include loan insurance premium payments, where you're paying for a policy that covers you in the event you can't keep up with repayments. This can increase the amount you have to pay each month but doesn't go towards your car loan balance at all.
If brokerage fees are charged
If you're getting your low interest rate car loans through a broker or through the finance officer at the car dealership, you might also be expected to pay brokerage fees on top of other finance fees. With some brokers, this can be as much as 4% of the amount you're borrowing.
What else will I be charged for a low interest rate car loan?
Low interest car loans come with a few costs, but each individual loan differs depending on the lender you apply with. Here is a breakdown of some fees to watch out for:
The establishment fee. This is the cost to set up your low rate car loan. Lenders usually add this cost into your loan amount and you pay it off with the rest of your principal.
Other monthly fees. These are ongoing fees for maintenance of your account.
Any early exit or early repayment fees. If you repay your loan early, you may be charged this penalty by the lender to cover the loss of interest.
Any additional repayment fees. If you make additional repayments, you may be charged a fee by your lender.
Late payment fees. You will be charged a fee for late and missed payments. Ensure you make your payments on time to avoid this.
5 ways to get a low interest car loan
Be in stable employment. Changing employers regularly or having irregular work shows a level of instability to your bank and it may worry about your level of risk. Being in a stable job for a good length of time is more attractive to a lender.
Have a good credit history. You're far more likely to get a good deal and a cheaper car loan if you have a good credit history by meeting repayments on previous debts.
Offer a deposit. While you can probably take out a loan for the entire purchase price of your car plus fees, paying a deposit may help. You will borrow a smaller amount of money and therefore reduce your repayments.
Shop around. You should never accept the first low interest car loan offer you see. Always take the time to look around and compare what else is available. Be prepared to ask questions about loan term and whether the rate is fixed or variable.
Negotiate. Regardless of which lender you approach for your low rate car loan, you can negotiate a discount on your interest rate and ask if the fees can be waived. If you've already done some comparison shopping and you know what other lenders are offering, you can use this information as ammunition to strengthen your negotiations.
Always check what fees are being charged on your loan and wherever possible, ask for them to be reduced. If the broker or finance officer won't reduce them, shop around elsewhere for a better deal. When considering low interest car loans, remember to compare car loan options before you apply.
Rebecca Pike is Finder's senior writer for money. She joined Finder after almost four years writing for business publications in the mortgage and finance industry, including three years as editor of Mortgage Professional Australia. She regularly appears as a money expert on programs like Sunrise and Today, as well as across radio and newspapers. She also holds an ASIC-recognised Tier 1 Generic Knowledge certification.
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