Choosing how to pay for a car deserves more attention than it usually gets, and the decision is easiest to get wrong on the day you sign. This page covers that second decision: dealer finance against a bank, credit union or broker, secured against unsecured, what pre-approval actually buys you, what a comparison rate does and doesn't cover, novated leasing, buying through a business, paying cash, and refinancing later.
MotorLoop does not arrange finance, take commissions from lenders or refer you to anyone, so nothing below recommends a lender or quotes a rate as available. This is general information, not financial advice — check anything that affects your own money with the lender, your accountant or a licensed adviser. If you're after the repayment arithmetic rather than the choice of loan, that lives in the car loan repayments FAQ.
Buying privately? Search the car on the PPSR before you hand over money. If a lender still holds a security interest over the vehicle, it can be repossessed from you even though you paid the seller in good faith and had nothing to do with the debt. A certificate costs a couple of dollars and takes a minute with the VIN. If a security interest shows up, don't pay until the lender confirms in writing that the debt has been discharged.
FAQs
Should I get finance through the dealer, or arrange my own loan?
Both are worth a quote, and the winner varies by deal. Dealer finance is convenient, and manufacturer finance arms sometimes run genuinely subsidised rates on specific new models that a bank can't match, so it isn't automatically the expensive option — since 1 November 2018 ASIC has banned flex commissions, the arrangement that let a dealer earn more by writing your loan at a higher rate than the lender required. The catch is that the person selling you the car may also be selling you the loan, so bring an independent quote with you: your own bank or credit union can usually price the loan before you set foot in a showroom, and a broker can put several lenders in front of you at once. Brokers must hold an Australian credit licence or act under someone who does and must give you a credit guide, but the statutory best interests duty in the National Credit Act is directed at mortgage brokers as defined in that Act rather than automatically at car finance brokers, so ask outright what commission they earn and whether it differs between lenders. Whoever you use, get the rate, the fees and the total amount payable in writing before you sign.
Should I get a secured or an unsecured car loan?
A secured loan uses the car itself as collateral, which lowers the lender's risk and usually the rate — the trade-off being that the lender can repossess the car if you fall behind. An unsecured loan leaves the car alone but typically costs more in interest, and it's often the practical choice for an older vehicle, because lenders commonly restrict secured lending by how old the car will be at the end of the term. Don't assume the lower rate wins on total cost: a cheaper rate stretched over a longer term can still cost more overall, which the repayments FAQ walks through. Run both structures through the loan calculator before you decide.
What is car loan pre-approval, and does it help me negotiate?
Pre-approval is a lender assessing your income, expenses and credit file and telling you conditionally how much it will lend and on what terms, before you've picked a car. It changes the negotiation, because you're shopping with a real budget and arriving as someone who can pay rather than someone who still has to sort finance out — which removes the seller's easiest lever for hurrying you. It is conditional, not a guarantee: the lender still has to be satisfied with the specific vehicle, and offers are time-limited, commonly somewhere around one to three months. Ask whether what you're being given is a soft indicative quote or a formal pre-approval, because the formal one generally leaves an enquiry on your credit file.
What does a comparison rate actually mean?
It rolls the advertised interest rate together with most standard fees into one figure, so two loans can be ranked without you doing the arithmetic — lenders advertising a consumer car loan rate have to display one beside it. The limitation is that it's calculated on a standard example amount and term, so unless your loan happens to match that example, it's a like-for-like yardstick rather than your actual cost. It also doesn't capture everything: government charges and fees that depend on what you do later, such as an early payout fee, generally sit outside it. Use the comparison rate to shortlist offers, then use the total amount payable over the full term to make the decision.
What affects the interest rate a lender offers me?
Mainly your credit history, your income against your existing commitments, and the shape of the loan itself — amount, term, whether it's secured, and the age of the car. Lenders have to assess whether you can repay without hardship, so credit cards, buy-now-pay-later accounts and other loans cut your borrowing capacity even when the balances are zero, and closing an unused card before applying can genuinely help. More than one credit reporting body operates in Australia, with Moneysmart naming Equifax and Experian as the main ones, and their scoring scales differ — running from zero to either 1,000 or 1,200 depending on who calculated it — so a score from one isn't directly comparable with another. You have a right to a copy of your credit report for free every 3 months, and it's worth checking before you apply: a wrong default or a stale listing is far easier to fix in advance than mid-application. Moneysmart explains credit reports and how to correct errors.
Am I better off paying cash than taking a car loan?
If the money is sitting idle and you have no higher-interest debt, paying cash avoids interest altogether and leaves the car unencumbered, with nobody holding a security interest over it. The arguments the other way are keeping an emergency buffer intact and, if you have a mortgage offset account, what that cash is already saving you there. One thing worth knowing at the negotiating table: a dealership can earn on the finance as well as the metal, so a cash buyer isn't automatically the more welcome one — don't assume cash unlocks a discount. The outcome to watch for is the reverse of the question, where easy finance quietly moves you into more car than you set out to buy.
Is a novated lease worth it, and who does it suit?
A novated lease has your employer deduct the lease and running costs from your pay before tax, with a financier and usually a salary packaging company involved — the savings come from paying with pre-tax income and from GST treatment on the purchase price and running costs. It suits salaried employees with settled jobs whose employer offers packaging, and it stops making sense quickly if you're self-employed, contracting, or likely to move: the lease follows you only if your next employer participates, and if they don't you take over the payments from after-tax income and lose most of the benefit. There's also a residual value owing at the end regardless of what the car is then worth, so a lease that looks cheap month to month can leave a real bill — balloon payments and residual values covers how that lands. Read novated leases explained, then have the quote compared against a plain car loan before you commit.
Do electric cars still get the FBT exemption on a novated lease?
As at August 2026, eligible battery electric cars first held and used from 1 July 2022 and priced under the fuel-efficient luxury car tax threshold can still be exempt from fringe benefits tax, which is what makes an EV novated lease unusually tax-effective. In May 2026 the government announced a phased wind-back: the full exemption running to 31 March 2027, then from 1 April 2027 the full exemption applying to eligible EVs valued at $75,000 or less with a 25% FBT discount above that, moving to a 25% discount across eligible EVs below the threshold from 1 April 2029. That was an announcement rather than enacted law as at August 2026, and while existing arrangements were flagged for protection, the exact scope is to be settled in draft legislation — so confirm the current position with your provider before signing. Plug-in hybrids stopped counting as low-emissions vehicles for this exemption from 1 April 2025, with a narrow transitional rule for arrangements financially committed before that date, and changing such an arrangement can create a new commitment and end the exemption. Check the ATO for the rules as they stand when you sign.
Can I buy a car through my business?
If the car is genuinely used in the business, financing it through the business — commonly a chattel mortgage, sometimes a lease — changes who claims what: a GST-registered business can generally claim the GST credit on the purchase, and interest and depreciation may be deductible to the extent of business use. The limit that catches people out is the ATO's car limit, which caps how much of a car's cost you can depreciate and also caps the GST credit you can claim; it's indexed each year, so check the figure for the year you buy. Legislation passed in August 2026 made the $20,000 instant asset write-off permanent for small businesses under the turnover threshold, but most cars cost more than $20,000, so for a car the car limit and ordinary depreciation usually do the work instead. Private use has to be apportioned, and providing a car to an employee or director can trigger fringe benefits tax, which is where an arrangement that looked clever gets expensive. This is a conversation for your accountant rather than a finance desk; business car finance and tax and ato.gov.au will get you ready for it.
When does it make sense to refinance a car loan?
Refinancing is worth pricing if rates have moved, your credit position has improved, or you signed something in a showroom under time pressure and have since read it properly. Ask your current lender for a payout figure and check your contract for an early termination or break fee — more common on fixed-rate loans — then compare the total amount payable on the new loan against what's left to pay on the old one, not the monthly repayment. Stretching the term is the trap: it lowers the repayment while raising what you pay overall, and it can leave you owing more than the car is worth, which becomes a problem the moment you want to sell. Put both versions through the loan calculator before you switch.
Where to next
- Car loan repayments FAQ — interest, terms and how the repayment number is built
- Loan calculator — compare two structures side by side
- Car loans and dealer finance in Australia — a longer read on the lending landscape
- Balloon payments and residual values — what you still owe at the end
- Novated leases explained — salary packaging, FBT and the residual
- Business car finance and tax — chattel mortgages, GST and deductions