Compare Used Car Loans - Australia

When you’re buying a car, especially a used car, you have enough to worry about without tearing your hair out over finance. We don’t believe you should have to wade through a quagmire of hype and financial jargon just to be able to buy something to take you from A to B (even if it is going to help you do that in fabulous style).

That’s why we put together this guide, which combines with our main page on car loans to help you compare used car loans and select one that suits your needs.

A used car loan is a specialised type of product that can be issued to an individual or a business. As its name suggests, it’s designed to allow you to purchase a second-hand car or other vehicle, such as a truck or motorbike.

A used car loan can help you buy a pre-loved motor vehicle. While some lenders may give you credit for a car that’s up to 20 years old, many may only finance younger cars. These lenders will generally only finance cars that will be younger than 13 years old by the end of the loan term. Providers of secured loans tend to have lower maximum age caps.

As we noted above, you can buy a second-hand car with a used car loan. However, many used car loans also enable you to buy other kinds of pre-loved motor vehicles, including:

• Truck
• Motorbike
• Van

Some lenders do offer specific loans for these, but they work pretty much exactly like their car equivalents.

If the car you want to buy is less than two years old, you can probably get a new car loan for it which might include a lower interest rate. So, you might want to check our guide on comparing new car loans.

If the car you want to buy is more than 20 years old, or it’s between 12 and 20 years old but you can’t find a used car loan you like, you may be able to find a suitable personal loan. There’s no reason you can’t use a personal loan to buy a car.

New and used car loans are fairly similar. For example, you can get a new or used loan with a variable or fixed interest rate. They’re also subject to similar lending criteria and both have similar application fees. The loan application, loan amount you can apply for and the loan term are even likely to be the same or similar. Restrictions related to extra repayments and early repayment fees are also likely to be similar when you compare equivalent new and used car loans. The main difference can often be the interest rate and thus the total cost of the loan.

It’s generally easier for lenders to figure out the value of a new car — it’s just the purchase price. And it’s still relatively simple to figure out the value of a ‘newish’ (up to two-year-old) second-hand car. Once cars age beyond that, there’s a wider range of kilometres that they may have done, they become less reliable and they grow more likely to suffer from significant issues that could reduce their value. As a result, it's more difficult for a lender to figure out the value of an older car and to predict how its value might change over the life of the loan.

As a result, lenders can face a lower risk of not getting their money back when they give out a loan for a new or nearly new car. So, new car loans generally have lower interest rates than do equivalent used car loans.

The value of a new or nearly new car is also typically much higher than for older cars (except when it comes to vintage cars), so they often make better collateral for a secured car loan. Another difference between a new and used car loan can often be that new car loans are far more likely to be secured.

If you take out a secured car loan, you have to use your car as collateral for the loan. Under this agreement, if you fail to pay back your loan, your lender will take possession of your car and sell it so they can recover the money you haven’t paid. It also means your lender may be able to offer a lower car loan rate because the loan is lower risk.

Because the value of older cars is less known, it may be less common to find used car loans that are secured.

There are a couple of other things to consider:

• Older cars are less likely to be electric or be really fuel efficient. So, if your preferred lender offers a ‘green car’ interest rate discount, you’re unlikely to be able to access it with a used car loan.
• Balloon payments can offer lower monthly repayments but require a large lump sum payment at the end of their loan term, so you would need to consider how you will meet that obligation at the end of the loan term.

There’s no one best used car loan because we all have different personal needs and financial circumstances and we don’t all want to buy the same car. So, one way to pick a suitable loan for you is to compare the pros and cons of a range of options in the context of what you need and what you want to achieve.

We’ve put together an easy-to-use guide to comparing car loans in general on our main car loan comparison page. You can improve that guide for used car loans, by adding these questions into the mix:

• How old is the car you want to buy? If it’s less than two years old, you may want to explore new car loan options. If it’s very old, it may not meet the eligibility criteria for many car loans, so you may have to consider a personal loan.
• How badly do you require a car? If it’s something that will make your life easier, you may be happy to offer your car as collateral for the loan.
• How fuel efficient is the car you want to buy? If it’s very fuel efficient, despite being a used car, you may be eligible for a ‘green car’ discount with some lenders.

There’s no way we can tell you exactly how to pick your ultimate used car loan because your spending habits, preferences, income situation and commitments are unique to you. So instead, we’ve given you some jargon-free facts to help you understand how used car loans are different to other car loans. And then we’ve laid out some simple questions to help you compare a range of options, giving you tools to help you choose a used car loan that’s suitable for your needs.