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.
Why apply for a car loan with Savvy?
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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?
The variables that will impact the cost of your loan include:
- Interest rate: the higher your rate, the more you’ll pay.
- Fees: the same applies to fees.
- Loan term: longer loan terms will lead to greater overall costs.
- Loan amount: because interest is calculated based on your loan balance, larger loan sums will lead to more interest paid.
- Early repayments: making additional repayments will reduce the cost of your loan (provided you aren’t charged fees to do so).
- Credit score and overall profile: your rate will be determined based on how confident your lender is in your ability to repay the loan, so higher credit scores and more available income can help your rate.
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 loan term.
- 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 | 5.00% p.a. | 12.00% p.a. | 7.00% p.a. | 7.00% p.a. |
| Comparison rate | 5.50% p.a. | 13.50% p.a. | 7.50% p.a. | 7.50% p.a. |
| Loan term | 4 years | 4 years | 2 years | 7 years |
| Monthly payment | $814 | $948 | $1,575 | $537 |
| Total interest & fees paid | $4,071 | $10,488 | $2,800 | $10,095 |
Car loan repayment calculator
Crunch the numbers to see how much you could be paying
Your estimated repayments
$98.62
| Total interest paid: | Total amount to pay: |
| $1233.43 | $5,143.99 |
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 secure 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.
The pros and cons of secured car loans
Pros
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Lower interest rates
Interest rates for secured car loans are often lower compared to unsecured loans because there's less risk for the lender, helping to reduce the overall cost of the loan.
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Higher chance of approval
Making consistent and on-time loan repayments can help improve your credit score, demonstrating to future lenders that you are a responsible borrower.
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Improves credit
Just like a regular personal loan, secured loans can be used for a wide variety of purposes, from consolidating debt to funding your next holiday.
Cons
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Risk of repossession
If you fail to make payments, the lender has the legal right to repossess the car to recoup their losses.
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Restrictions on car choice
Because your loan is secured, your car must hold enough value to recoup lost funds in the event your default on the loan. As such, there are stricter requirements on which cars you can buy.
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Mandatory comprehensive car insurance
Lenders often require comprehensive insurance to be taken out on the car, which is the most expensive car insurance option and can increase your overall expenses.
How to apply for your car loan with Savvy
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Fill out our simple online application form
Start your application by telling us about yourself and the car and loan you’re after. This will include information about your income, employment and credit score. It helps us find the best available loan for you.
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Supply any required documents
After you complete your application, we may request further documentation to verify details such as your employment and income. These can be submitted online via our portal.
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Discuss your options with us
Once we have all the information we need, we’ll compare the offers available to you from our lending panel. Your consultant will reach out to you and talk you through your car finance options and process to get the all-clear.
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Find your ideal car
If you haven’t already decided on (or found) your ideal car, our in-house car broker team, Vehicles Direct, can search our national network of dealerships to find the best available model for you.
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Have your application prepared and approved
Once we have all the info we need, your consultant will get to work preparing your application for submission. You can receive formal approval as soon as one business day after it’s submitted.
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Sign on the dotted line
We’ll send through your final loan documents and other forms to sign electronically. Once settlement is complete (which we’ll also handle for you), you’ll be the proud owner of your new or used car!
