Car Loan Interest Rates Explained | Aussie Car Loans

Car Loan Interest Rates Explained

interest rate percentage

One of the things that can sometimes be confusing when you’re shopping for a car loan is interest rates.

When you’re using a car loan repayment calculator and it asks for the interest rate, most people shrug their shoulders and aren’t really sure what interest rate to enter.

It can be frustrating since lenders often don’t publish their interest rates. There is good reason for this as each car loan and its interest rate are determined by the individual taking out the loan; their particular situation and the lender they’re applying to.

One Car Loan Rate For All?

The problem is that it’s not a one-size-fits-all sort of thing. Car loan interest rates take into consideration a number of important factors. These include:

  • Who the lender is
  • Age of the vehicle to be purchased
  • Amount being borrowed
  • Type of vehicle being purchased (e.g. car, van, ute, luxury vehicle etc.)
  • Financial status of the applicant
  • Type of financial product being applied for e.g. secured loan, unsecured, lease vs buy etc.

A Low Interest Rate Doesn’t Always Mean The Best Deal

Getting a great deal on a loan doesn’t just mean getting a low interest rate. Take a look at our Don’t be fooled by 0% car loans article for some idea of the hidden costs behind super low interest loans. Other factors you need to consider to see if you’re getting the best car finance are:

  • The loan term
  • The repayment frequency of the car loan
  • The type of loan product e.g. lease, buy, hire purchase, secured etc.
  • How the loan is structured
  • Payout penalties
  • Any fees and charges that are going to drive up the cost of the loan

All of these items affect the final amount you’ll pay on the loan and need to be taken into account.

So What Rate Am I Eligible For?

The only truly accurate way to know what sort of interest rate you’re going to get is by applying. The next best way is to make an educated and conservative guess. Questions we ask to help determine what sort of interest rate you might be eligible for include:

  • The age and type of vehicle you’re looking at for the loan.
  • Your credit history: have you had debt collectors after you?
  • Whether you’re purchasing privately or through a dealer.
  • Whether you rent or own your own home.
  • How much you need to borrow.
  • The length of time in which you’ll pay off the loan.

How Should I Use A Car Finance Calculator?

If you’re going to “play” with a car finance calculator, be realistic. If you’re looking at a late model vehicle, have a good credit history and own your own home you can probably assume a lower rate closer to the minimum that’s published. If you’ve had some credit troubles you should probably give us a call.


approved car loan documentBefore we finish up we need to add a warning about applying to multiple lenders to get the best rate. This could seriously backfire and end up getting you a higher rate. Multiple finance applications will leave you with a “busy” credit history which can cause some lenders to see you as a greater risk, and as a result attach a higher interest rate to your application.

The solution? Contact a car finance broker (such as Aussie Car Loans) who will be able to assess your current financial situation, the vehicle you intend to purchase, and put forward your application to the lender who is the best fit. It saves you time and gives you the best chance at securing the best deal.

Call us on 1300 769 999, or simple apply online to get things started today.

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