Car Finance Guide for Centrelink

If the only income you’re receiving is Centrelink payments and you need to buy a car, you mightn’t have the money to pay cash.

Read on to find out if borrowing money is a realistic option for you. You might be surprised!


Can you get a car loan on Centrelink?

The good news is, yes you can! But it depends on your individual situation and, as a rule of thumb, you will generally pay higher interest rates as you present a higher risk to the Lenders.

If Centrelink payments are your sole source of income, some lenders will be prepared to approve a car loan for you, but others won’t. The lenders that will approve your application will count your Centrelink payments as income. The others won’t.

Examples of people who might receive all of their income from Centrelink payments include job seekers, pensioners, carers and students.  Every Lender has different policies on this but generally those willing to accept more types of Centrelink income are ‘non conforming’ lenders who charge higher interest rates.

If Centrelink payments are only a partial source of your income, far more lenders will be likely to approve your car loan application!

Examples of people who may get part of their income from Centrelink payments include families receiving child care subsidies and family tax payments. These Centrelink payments supplement their other income, rather than being their sole source of income.


Car loans for Centrelink recipients

The rest of this article will focus on getting a car loan if you are unemployed or on a disability pension and your Centrelink payments are your sole source of income.

In these situations, it’s best to talk to a car finance broker. These brokers arrange vehicle loans for a living. They know the lending criteria of different lenders in the market. They will be able to let you know which lenders will be more likely to approve your loan.

The main concern of any lender when assessing your car loan application is that you will make your regular repayments and you won’t be put in any financial hardship meeting your commitments. You need to be able to demonstrate that you can afford the loan repayments and that you will make them on time, every time.

They will compare your regular income to your regular expenses and see how much spare money you have left over for your car loan repayments. They will also check your credit score.

If you have a good credit score, you’ll find it easier to get your loan approved. You will have a good credit score if you have a record of paying all your bills on time. They include utility bills, rent, credit cards, mobile phone accounts and any other debts you’ve had in the past five years.


Car loans for unemployed

Unemployment payments are considered as temporary Centrelink payments until you find a job. If you have no other income besides your fortnightly unemployment benefit, it’s important that you apply for a loan amount that you can afford.

There are two major ways to make your loan repayments more affordable:
1) borrow less (in other words, buy a cheaper car).

2) take out a longer repayment term. Standard car loan terms are up to 7 years in Australia. The longer the term, the cheaper the regular repayments.  However obviously over a longer term you will pay more interest overall.

When you find a job and your income increases, you’ll find it easier to make your repayments. You might be able to pay it off earlier and save interest.

Lenders will usually only approve you for a secured car loan if you are unemployed. This means that your vehicle will be used as security for the loan. They will register their financial interest in the vehicle via the Personal Properties Securities Register until you have fully repaid the loan.

Another option to help you get your loan approved is finding a guarantor.  A guarantor is a person (usually a family member) who agrees to become legally responsible for your loan repayments if you don’t make them.


Car loan for disability pension

If you’re on a fortnightly disability pension, this income is considered permanent (unlike unemployment benefits). You can use the same strategies to make your repayments more affordable as if you were unemployed – borrow less and take out a longer repayment term.

You should also arrange to make your car loan repayments fortnightly instead of monthly.

Again, the lender will likely require you to take out a secured car loan and a guarantor.


Bad credit car finance on Centrelink

If you have a bad credit score, you will find it harder to get your vehicle finance approved from any lender. You should catch up on any overdue bills to improve your credit score before you apply.


How to get a car loan on Centrelink payments

You should do up a budget to work out how much you can afford to repay before you start looking for cars and applying for finance. Do up a realistic budget of your Centrelink income and your regular expenses. Try and eliminate or at least reduce any non-essential expenses that you have. This will make it easier to make your repayments.

Once you have your budget in place, applying for a car loan pre-approval is a smart thing to do. It lets you know how much you can afford to pay for a vehicle, so you won’t waste time looking for cars that are outside your price range. Pre-approved finance can also help you to avoid being talked into dealer finance at a car yard, which is usually poor value.

Once you choose and pay for your car, a good way to make your regular repayments easier to manage is to align them with the timing of your Centrelink payments. In other words, make your car loan repayments fortnightly via direct debit rather than monthly. That way, you won’t overspend on other things and miss any car loan repayments.


How to apply for a Centrelink loan

As mentioned earlier, the best way to save yourself time and hassle if you’re on Centrelink and need a car loan is to talk to a car finance broker. They deal with lenders and applicants on Centrelink payments all the time.

Importantly, brokers work for borrowers not for lenders. Their job is to help you get a loan approved so you can get your new vehicle as soon as possible.


How we can help

If you’re on a Centrelink payment and you need to buy a new or used car, talk to our expert brokers at Auto Car Loans.  We’ll take the time to understand your situation before finding you a great deal.

We arrange vehicle finance for a living from a panel of over 50 lenders, including for Centrelink payment recipients. We will also help you with your loan application paperwork.

Get in touch with one of our experienced finance brokers today by calling 1300 301 051 during business hours.

DISCLAIMER : The thoughts and opinions conveyed on this website are those of the authors only and are of a general nature. This does not constitute financial or general advice to you from Auto Loans Group. You should seek your own independent advice from a professional which is specific to your circumstances before considering any of the items referred to in this article, including finance, insurance, and car buying.