Written by Secured car loans are a popular option if you need to borrow money to purchase a vehicle. By tying the loan to your car, these loans can offer competitive rates and greater chances of approval, making them an attractive choice for borrowers across Australia.
If you are looking for a secured car loan, turn to Savvy. With a panel of more than 40 lenders and experienced consultants to support you every step of the way, we can help you find the car loan you need. Get started with a free, no-obligation quote today!
What are secured car loans and how do they work?
Secured car loans are car loans where the vehicle you are purchasing serves as collateral. In other words, the car acts as security for the lender in case the borrower defaults on the loan. If you fail to make payments as agreed, the lender has the right to repossess the vehicle to recover their losses. This is how the secured car loan process works:
- Find a lender: research different lenders, their terms and interest rates to find one that suits your needs and situation. You can use online comparison sites or use a car finance broker like Savvy to help you with your decision.
- Application: you'll need to provide personal information, such as your name, address, employment details, income and information about the car you want to buy. The lender will assess your application and run a credit check to determine your eligibility for the loan and the applicable interest rate.
- Approval: if your loan’s approved, you'll need to sign a loan agreement. This will outline the terms and conditions and include details such as the loan amount and repayment schedule.
- Loan disbursement: once the loan is finalised, the lender will disburse the funds, typically directly to the seller. After the payment is made, you can pick up the car from the seller or dealership.
- Repayment: over the loan term, which typically ranges from two to seven years, you'll make regular monthly repayments that cover both the principal amount (the borrowed money) and the interest accrued.
What are the eligibility requirements for a secured car loan?
Eligibility requirements for a car loan can vary between lenders, but the following will typically apply wherever you go for finance:
- You must be at least 18 years old.
- You must be an Australian citizen or permanent resident (though in some cases you may be able to get a car loan on a temporary visa).
- You must have a stable income that can comfortably cover your car loan payments. This can come from employment or other sources such as Centrelink payments.
- You must meet your lender’s credit score requirements. A better credit score will typically qualify you for better interest rates, but you may still be able to get a loan with bad credit.
- Your car must meet your lender’s specifications regarding type, age and condition.
These criteria are designed to protect lenders and to ensure that borrowers are not burdened with a loan they cannot afford to repay. Lenders are required to follow responsible lending obligations, meaning they cannot approve applications that aren’t financially feasible for you.
How much will my secured car loan cost?
The average cost of car loan repayments in Australia was $210.11 a week in the first quarter of 2024, according to the Australian Automobile Association’s Transport Affordability Index. However, how much your car loan costs will depend on your particular circumstances and is determined by several factors:
Car value: the price of the car you wish to purchase generally determines the maximum loan amount you can borrow.
Interest rate: this is a charge by the lender for borrowing the money, expressed as an annual percentage rate (APR). Interest rates can vary based on your credit score, the lender and the loan term. However, they are typically fixed across the loanterm.
Fees and charges: additional costs such as loan origination fees, documentation fees and early repayment fees can all impact the total loan cost.
Comparison rate: the comparison rate encompasses both the interest rate and any associated fees, providing a more accurate representation of the total cost of the loan.
Loan term: repayment terms can vary but typically range from one to seven years, usually paid in monthly instalments. Longer terms usually result in lower monthly payments but higher total interest costs.
Down payment: any amount you can pay upfront towards the car purchase will reduce the loan amount and, subsequently, the total interest paid.
Here’s an example of how these different elements can affect the cost of your car loan, for the purchase of a $35,000 car:
| Scenario #1: low interest | Scenario #2: high interest | Scenario #3: shorter loan term | Scenario #4: longer loan term | |
|---|---|---|---|---|
|
Interest rate |
5% |
12% |
7% |
7% |
|
Comparison rate |
5.5% |
13.5% |
7.5% |
7.5% |
|
Loan term |
4 years |
4 years |
2 years |
7 years |
|
Monthly payment |
$813.98 |
$947.67 |
$1,574.99 |
$536.84 |
|
Total interest & fees paid |
$4,070.88 |
$10,488.22 |
$2,799.66 |
$10,094.53 |
What are the differences in cost between secured and unsecured car loans?
While unsecured loans often offer more flexibility, secured car finance is almost always the cheaper option overall. This is in large part down to interest rates: secured loans come with lower rates than unsecured loans, as they’re seen as a safer prospect by lenders. The table below demonstrates how much of an impact a small difference in interest rates can make over the course of a $30,000, five-year car loan:
| Type of loan | Interest rate | Monthly repayment | Overall cost | Total saving |
|---|---|---|---|---|
|
Secured car loan |
5.5% p.a. |
$573.03 |
$34,382.09 |
$1,686.22 |
|
Unsecured car loan |
7.5% p.a. |
$601.14 |
$36,068.31 |
N/A |
*Note: estimates do not include other car loan fees that may apply.
There are fees charged for both secured and unsecured car loans, primarily in the form of establishment and ongoing fees. These come in similar ranges, with establishment fees ranging from $0 to $600 in most cases and ongoing fees charged at between $0 and $10 to $20 per month. However, when negotiating your secured car loan with your lender, there’s generally more scope for certain costs to be waived compared to unsecured loans. By applying with Savvy and speaking with one of our consultants, we can help you secured the most affordable car loan deal for your needs.
How can I find the best secured car loan?
With so many options on offer, choosing a car loan can feel overwhelming. If you’re looking for a loan, here are some tips to for finding the best deal you can:
- Set your budget: before you start searching for a car, you need to know how much you can comfortably afford to pay each month. This will prevent you from overextending yourself and help you set realistic expectations.
- Check your credit score: your credit score significantly influences the interest rate you'll receive. Check your credit report (you can get a free credit report every three months) and, if necessary, take steps to improve your score before applying.
- Compare lenders: research different lenders and loan options, comparing things like interest rates, loan terms, fees and eligibility criteria.
- Get pre-approval: getting pre-approved for your car loan gives you an idea of how much you can borrow before you apply, giving you confidence when shopping for a car.
- Speak to an expert: if you’re still unsure about which car loan option to choose or even where to start, consider seeking advice from a car loan expert like Savvy. We can assess your situation to determine what you could qualify for and help you navigate the loan process from start to finish.
Why choose Savvy for your secured car loan ?
Years of experience
For more than a decade, Savvy has helped thousands of Australians to secure their car finance.
40+ lenders
More lenders on our panel means more choice – and more competition for your dollar.
Customer satisfaction
Savvy has one of the highest customer satisfaction rates – because we give all our customers top-tier service.
Fast approvals
Streamlined online applications mean your loan could be approved in as little as 24 hours.
Dedicated consultants
Our experienced car loan consultants are on hand to help you from start to finish.
No-obligation quotes
If you want to know how much you could save with Savvy, get a free quote – there’s no obligation to apply.
The pros and cons of secured car loans
Car Loan Repayment Calculator
Disclaimer: The results provided is an estimate only. Please read our Calculator Assumptions and Disclaimer for more information
How to prepare for your car loan application
Meet the eligibility criteria
To be eligible for a car loan, you will need to be:
- At least 18 years of age
- An Australian citizen or resident (or the holder of an eligible visa)
- Earning or receiving enough money to comfortably repay your loan each month
Check your credit score
Before applying for any type of loan or credit, you should check your credit history. You can obtain a free credit report from a credit reporting bureau once every three months.
Know your budget
Before you start applying for loans, you should have a firm budget in mind. Factor in all the costs of car ownership on top of the car loan. To understand how much you’ll likely be paying each month in loan repayments, use our car loan calculator to get an estimate in seconds.
Gather your documents
To verify your identity and ability to take out a loan, you will need to provide 100 points of ID, payslips, bank records, and other supporting documents. Having these handy when you apply speeds up the process.
Don’t apply more than once
You may be tempted to apply for car loans with multiple lenders to ensure you’re accepted somewhere. However, this can have a negative impact on your credit score, as credit bureaus may see this as a sign of financial trouble. If you use a car loan broker like Savvy, we will tailor loans to your circumstances and ensure that your application is only submitted when you are satisfied with the terms.
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Common car loan questions answered
What will my car loan interest rate be?
Your car loan interest rate will depend on several factors related to your profile, including your credit score, the type of vehicle you're purchasing and the type of car loan you choose.
Our car loan interest rates start from as little as 6.29% p.a. depending on your credit profile. However, your consultant can provide you with an indicative rate after we assess your application.
How much can I borrow to finance a car?
The amount you can borrow on your car loan will depend on factors such as your income, savings, asset backing, credit score and the value of the vehicle you want to purchase. Our car loans start from $5,000 but can reach far beyond $100,000.
How long can I take to repay my car loan?
The time to repay a car loan is reflected in the car loan term, which we provide to you as part of the approval process. This depends on what your lender offers and your borrowing power. We can help you find car loan terms ranging from 12 months to seven years, with repayments made weekly, fortnightly, or monthly. Note that weekly and fortnightly repayments will mean more repayments more often, and reduce the car loan term by approximately one month per year remaining on the term (e.g. 52 weekly/26 fortnightly repayments = 13 monthly repayments).
What is car loan pre-approval?
Car loan pre-approval, also known as conditional approval, is a process in which a lender processes your application and gives you a dollar figure of how much they are prepared to lend before you purchase a vehicle. (You can use this as a “price ceiling” in negotiations with dealers or sellers.) You typically have from one to three months to find a vehicle before this pre-approval expires. Talk to one of our friendly consultants to start the pre-approval process today.
Can I get car loan approval for a used vehicle?
Yes – Savvy helps Australians finance all types of vehicles, from brand new, certified used, used cars from private sellers, and classic or vintage vehicles. Some cars may be subject to eligibility due to age and condition (20+ years.) If you’re unsure, ask your friendly consultant.
How long does it take to get approved for a car loan?
When applying with Savvy, you can be formally approved for your car loan as soon as one business day after submitting your application. However, this will also depend on factors such as the time of day and week you apply and the complexity of your profile.
Can I get approved for a car loan for my business?
Yes, if you're self-employed and wanting to buy a car for 50% or more business usage, we offer a variety of business car finance solutions. Chattel mortgages, business hire purchase arrangements, and vehicle leases are examples of this. Personal vehicle loans have different restrictions than business finance, as it is not regulated under various financial legislation to the same degree.
Will I get approved for a car loan without a deposit?
Yes – you can apply for a car loan without a deposit, known as 100% finance. However, you will need to demonstrate creditworthiness and an ability to comfortably pay back the loan on time and in full. However, if you have a significant deposit (more than 10%) could help you save on interest as you don’t need to borrow as much.
What documents do I need to supply as part of the car loan application process?
The documents you’ll need as part of your car loan application include:
- Driver’s licence
- Last two payslips
- Savvy application, consent form and credit guide (supplied by your consultant)
However, additional information can help us make a more detailed profile of your finances, which can often influence the final interest rate lenders are able to offer you. In some cases, your consultant may request further documentation such as 90 days of bank statements, tax returns or Notices of Assessment if you’re self-employed and information about your car such as its make, model, age and repair or service history.
What are the eligibility criteria to qualify for a car loan?
The eligibility criteria around applying for a car loan will be slightly different depending on the lender you ultimately select. However, Savvy’s own initial eligibility criteria is as follows:
- You must be at least 18 years old
- You must be an Australian citizen or permanent resident (some lenders can work with eligible visa holders)
- You must be earning a minimum income (typically at least $26,000) from stable sources such as regular employment
- You must have an average credit score or higher (although we may be able to help applicants who have bad credit)
