End of financial year a good time to buy
Are you dreaming of a flashy new car to drive off in the winter sunshine? The end of the financial year is a great time to buy a car as you often can snap up a bargain in the sales.
When it comes to car finance, car loans can be a great option. They're available for periods between one and seven years and usually have minimum amounts. The longer the period and the less you borrow, the lower the repayments.
Like with credit cards, when the official cash rate drops (like in May 2016), banks often don't pass on the benefits to consumers when it comes to variable rate car loans. Despite this, there are some good rates on offer at the moment – the best ones are from credit unions and other mutual lenders.
Top 10 loans for new cars
Source: Mozo.com.au at 25 May 2016. About the table: Interest rates are for secured car loans. Unsecured car loans may be more expensive. The fixed rates are available for various terms. Table notes: * Comparison rate calculated for $30,000 over five years. (A) Rates vary depending on the applicant's credit rating, these are the best rates offered to applicants with the best credit rating.
| Comparison rate (%)*
|| Interest rate (%)
|| Application fee ($)
|| Car Loan
|| 4.5 (A)
|| People's Choice Credit Union
|| Discounted Personal Loan
|| Community First Credit Union
|| New Car Loan
|| G&C Mutual Bank
|| Fair Rate Personal Loan - AA Rated Borrowers
|| 5.99 (A)
|| Credit Union SA
|| Car Loan Special
|| Police Credit Union
|| Car Loan
|| Queenslanders Credit Union
|| Special Car Loan
|| Newcastle Permanent
|| Personal Loan
|| IMB Bank
|| Car Loan (up to 2 years old)
|| Greater Bank
|| New Car Loan
Secured car loans the cheapest
There are two types of car loans: secured and unsecured. Secured car loans are the cheaper option. On the Mozo database the average secured personal loan rate is currently 8.40% while the average unsecured rate is 12.08%.
But there are some disadvantages with secured car loans:
- Your car can get repossessed if you fall behind with the repayments.
- Car insurance premiums can be more expensive than for cars with unsecured loans and cars paid outright.
- The loans is usually only available for new or fairly new used cars.
Car loan traps
There are now a number of car loan providers that advertise their cheapest interest rates which are only available for people with the very best credit rating. See our report on how to protect your credit report. Another problem with these loans is that you may have to pay the application fee only to find out that the rate offered to you isn't competitive. Application fees are often non-refundable.
"Peer to peer lenders always make a risk assessment of each customer's application before deciding the rate they will offer, and a number of banks and other lenders adopt this pricing strategy," says Peter Marshall, Product Data Manager at Mozo. "So for example if you have had a bad debt on a credit card or home loan, you are likely to have to pay a higher rater of interest than someone with no marks on their credit record." Marshall advises to always check if the rates are variable or if every successful applicant gets the advertised rate.