Used Car Loans

A used car loan is a personal loan that’s used to help purchase a second-hand vehicle. Depending on your income, you’ll typically be able to borrow between $2,000 to $70,000 for a used car and pay it off anywhere between 1-7 years.  So, if you’re after a car loan to help you buy a second-hand car, our car loan comparison tool can help. Compare lenders and repayments to find the right loan for your needs.

Used car loan comparisons on Mozo - last updated November 26, 2020

Search promoted car loans below or do a full Mozo database search. Advertiser disclosure.

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  • mozo-experts-choice-2021

    3.97% p.a.

    4.51% p.a.based on $30,000
    over 5 years

    Terms from 3 to 5 years. Representative example: a 5 year $30,000 loan at 3.97% would cost $33,525.38 including fees.

      Compare
    Details
  • 4.89% p.a.

    5.53% p.a.based on $30,000
    over 5 years

    Terms from 1 to 7 years. Representative example: a 5 year $30,000 loan at 4.89% would cost $34,377.58 including fees.

      Compare
    Details
  • 4.89% p.a.to 8.89% p.a.

    5.44% p.a.to 9.46% p.a.based on $30,000
    over 5 years

    Terms from 3 to 7 years. Representative example: a 5 year $30,000 loan at 4.89% would cost $34,276.58 including fees.

      Compare
    Details
  • 5.19% p.a.to 18.95% p.a.

    5.46% p.a.to 19.26% p.a.based on $30,000
    over 5 years

    Terms from 3 to 7 years. Representative example: a 5 year $30,000 loan at 5.19% would cost $34,320.13 including fees.

      Compare
    Details
  • 5.50% p.a.

    5.85% p.a.based on $30,000
    over 5 years

    Terms from 1 to 7 years. Representative example: a 5 year $30,000 loan at 5.50% would cost $34,632.09 including fees.

      Compare
    Details
  • 6.81% p.a.

    7.80% p.a.based on $30,000
    over 5 years

    Terms from 2 to 5 years. Representative example: a 5 year $30,000 loan at 6.81% would cost $36,280.02 including fees.

      Compare
    Details
  • mozo-experts-choice-2020

    6.79% p.a.

    7.16% p.a.based on $30,000
    over 5 years

    Terms from 1 to 7 years. Representative example: a 5 year $30,000 loan at 6.79% would cost $35,729.09 including fees.

      Compare
    Details

^See information about the Mozo Experts Choice Car loans Awards

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Used car loan interest rates of note in October

  • Lowest variable rate used car loan: Australian Military Bank - Car Loan (Excellent Credit) - 3.60% p.a. (4.48% p.a. comparison rate*)

  • Lowest fixed rate used car loan: Loans.com.au - Used Car Loan - 4.67% p.a. (5.22% p.a. comparison rate*)

Finding the best used car loan for you

Once you start searching for a car loan, you’ll notice there’s a fair few to choose from as most Australian banks and online lenders like peer to peer lenders will offer car loans that can be used to fund a used car purchase.

So to help you become your own car loan expert, we’ve pulled together this short guide which answers all the questions you’ll have about finding the perfect car loan.

What is a used car loan?

Similar to a new car loan, a used car loan allows you to borrow money to purchase a second-hand vehicle which you’ll pay back over a set period of time, plus interest.

How do used car loans work?

Generally speaking, a used car loan works pretty much the same way that a new car loan works. It allows you to borrow a set amount of money to cover the cost of purchasing a car, which you’ll pay back plus interest over a set loan term.

The only real difference between the two is that a used car loan is designed specifically for secondhand car purchases. So whether you purchase your pre-loved vehicle from a private dealer, an auction or a dealership, a used car loan is pretty much the same across the board.

What is considered a used car?

In Australia, a ‘used car’ refers to any vehicle that has previously been registered in Australia. One of the perks of purchasing a secondhand car is they’re generally more affordable than buying a brand new vehicle.

On top of this, a brand new car decreases in value the second you leave the dealership - so going with a secondhand vehicle you can avoid this instant depreciation in value.

How old can the car be? Does this vary by the provider?

Be aware that some lenders will only finance secondhand vehicles up to a particular age (usually no more than 5 years old) as older cars are considered to be more of a risk.

However, this can be quite specific to the car itself as some lenders will be more open to providing finance for an older vehicle if it has maintained its value.

Are there different types of used car finance?

Yes! When you start comparing used car loans you’ll quickly find that there are generally two options you can go for: secured used car loans and unsecured used car loans. On top of this, you’ll also have the choice between either a fixed or variable interest rate.

Secured vs. unsecured used car loans:

  • Secured used car loans: With a secured car loan, you’ll need to secure an expensive asset (i.e. your new used car) against the loan. Most lenders will only offer secured loans for a car that is less than 3 years old or the purchase of a new car.

  • Unsecured used car loans: You’ll find that the majority of used car loans are unsecured loans, which means that you won’t actually be required to secure the loan against your car.

Secured car loans will usually have a lower interest rate than unsecured loans, so if you’re getting a loan to buy a used car, it’s a good idea to look for one that offers some flexibility with repayments so that you can reduce the amount of total interest you pay by making extra repayments.

Fixed or variable rate, what’s the better car loan deal?

As you start to compare car loans, in addition to having the choice of a secured or unsecured loan,  you’ll also be able to choose between either a fixed or variable interest rate. The interest rate you choose should depend on your personal circumstances.

  • Fixed interest rates: If you choose a fixed rate loan, you’ll be ‘locking in’ your rate for the entirety of the loan term. This means that no matter how the market moves, your interest rate and repayments will always stay the same. This can make it easier to budget. One of the downsides to a fixed rate loan is that if you do get ahead on your repayments you may have to pay a fee if the loan is repaid early.

  • Variable interest rates: On the other hand, variable interest rates change in accordance to the market, and can either rise or fall during your loan term. With this type of interest rate, there’s rarely an early repayment fee and usually no exit fees, so if you can you’ll likely be able to pay off your loan with no additional cost.

What is a car loan comparison rate?

Once you start shopping around on car loans you’ll notice that there’s another rate that sits beside the interest rate in our tables called the ‘comparison rate’.

A comparison rate gives you a more accurate idea of the ‘true’ cost of the loan by taking into account not just the interest rate on the advertised loan, but any additional fees that may be charged on top.

Just be aware that the advertised comparison rate is only a guide, the actual comparison rate for your used car loan will depend on your loan amount and the loan term but it is a useful rate to use as a guide to compare loans.  

What features should I look for in a used car loan?

As with any sort of loan, when taking out a used car loan some of the most important features to consider are those that will help save you money, such as:

The loan term:

With most used car loans, you’ll get to choose the loan term (the period of time in which you’d like to repay the loan within). For used car loans, this typically ranges anywhere between 1 to 5 years.

The choice of the loan term will usually come down to your ability to repay the loan. The shorter your loan term, the higher your regular repayments will be.

Scenario:

To look at the difference between the cost and repayments between a 3 and 5-year loan, let’s look at the following scenario:

  • Loan amount: $15,000

  • Interest Rate: 6.99% p.a.

  • Repayment frequency: monthly

On a 5-year loan with these terms, you’d pay a total of $2,817 in interest with a monthly repayment of $297, whereas a 3-year loan would see you only pay $1,671 in interest but you would have a monthly repayment of $491.

Fees: Upfront vs. ongoing fees

Like with any loan, used car loans usually come with some fees attached. This may include:

  • Upfront fees

  • Ongoing fees

  • Annual fees

  • Late repayment fees

  • Early repayment fees

  • Break fees (fixed rate loans only)

  • Loan discharge fees

Upfront fees: When taking out a used car loan, you’ll likely be charged a one-off payment at the time of opening your loan which depending on the lender can range anywhere from $0 to $600. If you find a loan with a high upfront fee, make sure that the interest rate and features will outweigh this cost.

Ongoing fees: Your lender might charge an ongoing loan maintenance fee. While this fee can be as little as $10 a month, it’s important to remember that you’ll be paying this amount every month for the life of your loan. Which means a $10 monthly fee on a 5-year used car loan would eventually add up to $600 in ongoing fees.

Flexible repayment options:

Used car loans may also come with handy features that can give you a lot more flexibility with repayments, like extra repayments and redraw facilities.

Extra repayments: Having the option to make extra repayments towards your loan could really help you save on interest by shortening the duration of your loan.

Redraw facility: With a redraw facility you’ll have the ability to redraw on any extra repayments you’ve made should you need access to extra funds if an unexpected bill or expense pops up. Be aware that there may be limits to how much money you can redraw on or fees for redrawing.

How much will I be able to borrow?

Depending on your income, you’ll typically be able to borrow between $2,000 to $70,000 for a used car and pay it off anywhere between 1-7 years. However many personal loans amounts range from $5,000 personal loans to $50,000 personal loans.

What credit score do I need for a used car loan?

When taking out any sort of loan you’ll need to have a good credit score first in order to prove to the lender that you’ll be a good borrower who’ll be able to pay back the loan. With a poor credit score, you’ll be less likely to get approved for a loan, so it’s important to get your credit report into good shape before applying.

Some lenders will offer different interest rates based on your credit score, which means you could be rewarded with a better rate for maintaining a high credit score or by the same token if your credit score is poor you could be punished with a bad rate.

You can use our Mozo Rate Matcher tool to see which loans you could be eligible for based on your credit score. Then use Mozo’s Car Loan Repayment Calculator to calculate the repayments and total interest on various car loan amounts.

What is the best used car loan?

When kicking off your search for the best used car loan, a great place to start is with a 2019 Mozo Experts Choice Personal Loan Award-winners.

To pick the winners of the 2019 Mozo Experts Choice Personal Loan Awards our Mozo Expert judges conducted a thorough analysis of 286 personal loan products from 78 Australian financial institutions, assessing each against a wide range of criteria and awards categories (which you can read about in our methodology report). 

To pick the 2019 Mozo Expert Choice Personal Loan Award-winners of the used car loan category specifically, our expert judges ran a comparison on all the loans in the Mozo database to find the best value loans for used car borrowers.

Their calculations were based on a $15,000 loan including principal, interest, fees and charges repaid over 5 years. 

2019 Mozo Experts Choice Personal Loan Used Car Loan category award-winners:

Some of the winners in the used car loans category include:

To see all the winners visit our 2019 Mozo Experts Choice Personal Loan Awards landing page.

So, for a top-notch loan to help get you in the driver's seat of your second-hand vehicle, go check out the 2019 Mozo Experts Choice Personal Loan Award-winners from the used car loan category.

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JP Pelosi
Managing editor

Jean-Paul (JP) Pelosi is an experienced journalist and editor who has contributed to many of Australia's leading media outlets including The Guardian, News.com.au, Domain.com.au, Investment Magazine and ANZ's Bluenotes. He has also edited news and communications for large financial services companies such as CommBank, Suncorp, Allianz and Amex. He loves a well told story and applying his editorial experience to content that readers both care about and enjoy. JP heads up our writing team.

More FAQs about used car loans

Are there any restrictions with a car loan for second-hand cars? 

One of the most common restrictions you’ll find when you take out a loan for a used car is what is defined as an ‘old car’, especially if you’re looking to secure the loan. Some providers may consider a car over 2 years to be old, while others may not approve a loan for a car that’s over 12 years old.

How will I receive my funds to buy my used car?

Once your loan has been approved, then funds will either be deposited into your bank account or if you are buying through a dealer they can be sent directly to the car dealership.

Can I switch car loans?

Yes, you can. If you find that your financial circumstances change during the course of your loan term there is an option to refinance car loans. So if you ever need to refinance your used car loan, you can check out our car loan refinance table.

What else should I consider if I'm borrowing money for a used car? 

If you’re borrowing money to buy a used car then you’ll want to make sure that the vehicle is in the best possible condition for its age. You don’t want to be stuck paying off a loan for a car that spends more time in the mechanics than it does on the roads.

So, when buying a used car it’s wise to get an independent inspection done on the car to check:

  • The number of kilometres the car done compared to its age

  • Whether there any dents, scratches or bubbles in the paint

  • Whether there are any cracks in the windscreen

  • Check the car for rust

  • That the tyres exceed the legal tread depth of 1.5mm

  • That the air conditioning, windows and lights work

What other car expenses will I need to budget for?

If you think that the cost of buying a car is just the initial price you pay for the vehicle, guess again. Regardless of whether you’re purchasing a secondhand or brand new vehicle, there’s a bunch of different expenses that you’ll need to budget for when buying a car - such as:

Rego:

Each year you're required to pay a registration fee in order to keep your car on the road. On top of this fee, when you register your car you’ll also need to purchase a CTP green slip and pink slip (safety check). In order to pass the pink slip safety check and register your car, you might be required to have some repairs done on your car - which could potentially be quite costly.

Car insurance:

Another cost that comes with owning a car is car insurance. Depending on the level of cover you buy (either third-party or comprehensive) your car insurance policy will cover the cost of any damage you cause to your own car or another person’s car/property if you’re involved in an accident.

How can I improve my chances of getting approved for a car loan?

A few things you can do to increase your chances of getting approved for a used car loan are:

  • Improve your credit score: In order to get approved for a used car loan (or any loan for that matter), you’ll need to have a good credit score to prove to the lender that you’re a good potential borrower who’ll pay the loan back on time. So if your credit score is in poor shape then be sure to put in the work to improve it before you consider applying for a loan.

  • Ditch the debt: On that note, you’ll want to rid yourself of any unnecessary debt that’ll harm your chances of getting approved. Start paying your bills on time and pay off any old credit card balances or other lingering debts.

  • Shop around: Make sure to shop around first by comparing used car loans and only apply for one if you think you’ll have a fair chance of being approved for. To get an idea of which loans you’ll likely be eligible for, check out Mozo’s Rate Matcher tool which compares loans based on your credit score.

What do I need to apply for a car loan?

Once you’ve found the right used car loan for you, you’ll need to have all the relevant documentation prepared for when you fill out the loan application form. This could include things like:

  • Proof of income: This could include bank statements or payslips, as lenders will need to see that you are able to repay the loan through a steady income.

  • Proof of savings: Lenders also want to see genuine savings and that you are able to spend your money wisely.

  • Proof of liabilities: This involves any debt you may have on either a credit card or home loan.

  • Proof of insurance: Depending on the lender, you may not be approved for a car loan unless you have comprehensive cover beforehand. You can use our car insurance comparison tool to sort out your car insurance policy.

  • Identification: Such as utility bills, passport, proof of age card, driver’s license, one to two year’s tax returns and bank statements

You’ll also likely need some additional information about the car itself, such as:

  • Car VIN number (to verify whether or not it’s a stolen vehicle or if there’s money owed on it)

  • Registration plate 

  • Motor number 

  • Car make, year and model

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