What’s An Average Car Loan In Australia?

There are over 20 million licensed motor vehicles on Australia's roads, our love of cars also means there is a large car loan industry in this country with lenders offering a wide variety of car loan products. There are secured car loans and those that are unsecured. There are car loans that come with ongoing fees and those that don't. 

When considering taking out a car loan, it's important to consider all the different factors at play so that you can choose the right loan for you. And one of the main ones is understanding what constitutes an average car loan in this country. So, to save you time, we've put together this article to give you all the information you need.

What percentage of Australians have a car loan?

When you're in the market for a new or used car and are thinking about using finance, know that you're not alone. At last count, some 2.7 million Aussie drivers have a car loan, so that equates to around 13% of us. And car loan numbers are on the rise too with a 20% increase in car loans over the past four years, according to research. 

This is a good thing for new lenders as it means there are more customers in the car finance market, which means there are plenty of competitive car loan products out there.

So, what is an average car loan in Australia?

The answer to this question depends on a number of factors, including the type of car you're looking to buy, the size of your deposit, the length of the loan, your credit score, and the interest rate you're able to get. But, as a general rule of thumb, you can expect to pay around $30,000 for a new car over a four-year loan period.

How do car loans work?

Essentially, you borrow a sum of money from a credit provider in order to purchase a car. The loan is repaid by way of making a monthly repayment over an agreed period of time, plus interest.

There are two main types of car loans in Australia: secured and unsecured. A secured car loan is one where the car you're purchasing acts as security for the loan. If you default on the loan, the lender can repossess your car. An unsecured car loan is not secured by an asset, which means the interest rates are usually higher.

The interest rate you're able to get will depend on a number of factors, including your credit score, the size of your deposit and the term of the loan. The longer the loan, the higher the interest rate is likely to be. The average car loan interest rate in Australia is currently between 5 - 10%. However, depending on different factors, you may be able to get a lower rate. For instance, did you know that new cars tend to attract a lower interest rate than used cars? That's right, so if you're looking to get a car loan it might be worth considering buying a new car instead of a used car.

Of course, one of the other things you'll need to consider when applying for a car loan is the ongoing fees. Many car loans will come with monthly or annual fees which can add up over the life of the loan. So, be sure to read the fine print and factor in these fees when you're comparing car loans.

The larger the deposit you can put down, the smaller your car loan and the lower your monthly repayments will be. As a general rule, you should aim to have a deposit of at least 20% of the car's value. Borrowers who put down a modest deposit (10-20% of the total value of the vehicle) may be able to get a better interest rate. So, if you're able to make a deposit, it's well worth considering. However, keep in mind that in many situations, a deposit isn't required for financing approval.

What is a comparison rate?

A comparison rate is a tool that can help you compare different car loans. It takes into account the interest rate plus any fees and charges associated with the loan, which means it gives you a more accurate picture of the true cost of a car loan. For instance, a car loan with an interest rate of 12% and $500 in upfront fees would have a comparison rate of 14.76%. The best way to compare car loans is to use our car loan calculator which will allow you to input different loan amounts, terms and interest rates to see how they impact your repayments. This can help you narrow down your options and find the best car loan for you.

How many years should your car loan be?

The vast majority of car loans in Australia are paid off over four years, although you can find loans with terms as short as one year or as long as seven years. That said, securing a car loan with a shorter term usually means having to make higher repayments. On the other hand, car loans with longer terms and lower monthly repayments will end up costing you more in interest over the life of the loan.

As a general rule, you should only take out a car loan for as long as you need it. If you can afford to make a higher monthly repayment amount, a shorter car loan will save you money in the long run. However, if your budget is tight, a longer car loan with lower monthly repayments might be the best option for you.

How long is a typical car payment?

The average car loan repayment in Australia is $550 per month. However, this will vary depending on the size of your loan, the interest rate you're paying and the length of the loan. The length of time it takes most people in Australia to pay off their car loan is four years.

How much is a car loan on $30000?

Let's say you're looking at car loans for a $30000 new car. Applying an interest rate of 6.99% p.a. means that your car loan repayments will be around $730 a month, over four years. The total cost of this loan would be slightly more than $35000. This is not taking into account things like application fees and ongoing fees.

Where should I get my car loan from?

Now that you know a little more about car loans in Australia, you can start shopping around for the best deal. Be sure to compare interest rates, fees and loan terms before you decide on a car loan. And remember, the larger your deposit is, the smaller your car loan will be and the lower your monthly repayments will be.

There are plenty of options when it comes to car loans in Australia. However, not all car loans are created equal. So, it's important to compare your options and find the right loan for you.

You can go through a car dealer, a bank, or an online lender. Each option has its own pros and cons, so it's important to compare your options and find the right loan for you.

Dealerships

Car dealerships usually have their own in-house financing options. This can be a convenient option, as you can apply for financing and shop for a car all in one place. However, it's important to remember that car dealerships are businesses, and their goal is to make a profit. So, they may not always have your best interests at heart.

Banks

Banks are usually a good option for car loans, as they typically offer a lower interest rate and flexible repayment options. However, it can be a hassle to apply for a car loan at a bank. You'll need to provide documentation, such as proof of income and employment, and the application process can take weeks.

Online Lenders

Online lenders are a good option if you're looking for a fast and easy car loan. They typically have a quick and simple application process, and you can often get approved for financing within 24 hours. However, it's important to compare car loan interest rates and ongoing fees before you choose an online lender.

You can use an online platform like Driva to compare different lenders and find the best rates. All you need to do is enter some basic information about yourself and the loan you're looking for, and Driva will show you a list of lenders who can offer you competitive rates.

Final thoughts

Car loans are a popular option for financing a car in Australia. However, it's important to understand the different types of car loans and compare your options before you apply for financing. Be sure to shop around for the best deal on a car loan, and remember to factor in things like interest rates, ongoing fees, monthly account fees, and early repayment fees. It could be worth checking your credit score before you apply for a car loan, as this could affect your interest rate. 

Australians love their cars. In fact, car ownership is a big part of the Australian way of life. But with car ownership comes car loans. And loans on new and used cars can be a big financial commitment.

That's why it pays to shop around and understand the different car loan options on offer before you sign on the dotted line.

Declan Flaherty

As the Digital Marketing Manager at Driva you can find Declan during the day transfixed by a flurry of spreadsheets, mar-tech, Slack emojis and graphs all pointing in the right direction and keeping up to date with the latest car finance trends.

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