Car Finance: Interest Rates Explained

The necessity to pay interest, irrespective of the loan type, is one of the primary pain points when applying for a personal car loan. Often, we’re on a very fixed income, so understandably it’s preferred to pay as little interest as possible.

This always begs the question; “what is the lowest interest rate I can get?”

The answer is, We all qualify for a different interest rate on our car loan, and this rate depends on a lot of factors, such as:

The Vehicle

  • Is the car for business or private use?
  • Is it an old car or a new car?
  • Is it a used car?
  • What type of car is it? (car, van, ute, luxury vehicle etc.)
  • Is it a private sale?
  • Is it a dealership sale?
  • How much does the car cost?

The Borrower (you)

  • Do you have a healthy credit rating?
  • Do you have any outstanding debts?
  • Do you have any other active loans?
  • Do you own your home or do you rent?
  • Do you have a stable income?
  • How long have you been in your current position of employment?
  • (if business use) how long has your company been registered?
  • How much money do you need to borrow?
  • How long will the loan period be?


Your eligible interest rate is based on the answers to above questions. Once all of these factors are taken into consideration, it is then up to your finance broker to find you the best rate you can get on the market.

The operative word being: you. The lowest interest rate you can get, is dependent on your circumstances and that of your desired vehicle.

One size certainly doesn’t fit all, and it is extremely beneficial to have somebody advocating to the banks and other lenders on your behalf. They will understand your personal circumstances, and ensure the interest rate you get is personalised to you.

A word of advice, a low interest rate doesn’t always mean the best deal. While a 0% interest rate may certainly seem enticing, dealerships that offer this will often try to make up the difference in other ways:


If the dealer in the showroom offers you the 0% interest finance deal, the price of the car is often non-negotiable, meaning you’ll be paying the full sticker price of the vehicle.

Trade-In Value

You’re likely to be offered a much lower price on a trade-in if you’re opting for the 0% finance deal.

The Loan

You’ll likely be required to agree to a less flexible loan agreement. This can have implications on:

  • The length of the loan,
  • The repayment frequency,
  • The type of loan you’re eligible for,
  • Balloon payments,
  • Payout penalties, and
  • Any other fees and charges that are going to drive up the cost of the loan.

If you’ve been through the above process and believe your eligible interest rate may be too high, you can find some tips here on improving your credit rating and hopefully, qualifying you for a more modest interest rate.

Do you feel like you’re ready to take the next step in your car-buying journey and would like to have someone trustworthy in your corner? Auto Car Loans are here to help. Give us a call on 1300 301 051 or reach out at any time at [email protected] to get started.


We offer car finance services in the following locations: Car finance in Adelaide, Car finance in Brisbane, Car finance in Canberra, Car finance in Darwin, Car finance in Gold Coast, Car finance in Hobart, Car finance in Melbourne, Car finance in Newcastle, Car finance in Perth, Car finance in Sunshine Coast, Car finance in Sydney.



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