Car LoansMakeMyLoan brokers compare dozens of lenders and owe you a Best Interests Duty — your bank doesn't.
A car is the second-biggest purchase most Australians make, and the loan attached to it deserves more attention than it usually gets. The difference between a well-structured car loan and a rushed one signed at a dealership desk can run to thousands of dollars over the term — not because of any single trick, but because of a handful of details that are easy to miss: how the loan is secured, how old the car is allowed to be, whether there is a balloon payment at the end, and what the comparison rate says that the advertised rate does not. This guide walks through each of them in plain English.
A secured car loan uses the vehicle itself as security. The lender registers its interest on the Personal Property Securities Register (PPSR), and if you default, it can repossess and sell the car to recover what is owed. Because the lender carries less risk, secured loans almost always come with lower interest rates than unsecured alternatives.
An unsecured personal loan can also be used to buy a car. No security is registered, so the lender prices in the extra risk with a higher rate. Unsecured borrowing makes sense in narrower situations — buying a very old vehicle that lenders will not accept as security, buying privately where a secured settlement is awkward, or borrowing a small amount over a short term.
For most buyers of newer cars, a secured loan is the natural fit. Just understand what you are agreeing to: the car is not fully yours to sell until the loan is cleared, and the lender's PPSR registration will show up in any buyer's check. You can see how secured loans are structured on our car loans page.
Lenders care about the age of the vehicle because it is their security. A car that is worth less than the loan balance leaves them exposed, and older cars depreciate from a lower base while carrying more mechanical risk.
In practice, most lenders apply a rule along the lines of the car's age at the end of the loan term, not at purchase. A common threshold is that the vehicle should be no more than around 10 to 12 years old when the loan finishes, though policies vary widely between lenders. That means a seven-year-old car might only be financeable over a shorter term, which pushes repayments up, and a very old car may only qualify for an unsecured loan at a higher rate.
The practical takeaways:
A balloon (or residual) is a lump sum left owing at the end of the loan. Instead of repaying the full amount over the term, you repay only part of it, and the balloon — often a substantial percentage of the purchase price — falls due as a single final payment.
The honest version of the trade-off looks like this:
The risk sits in that final step. If the car is worth less than the balloon when the time comes — very possible given how cars depreciate — you can owe more than the vehicle is worth. Balloons suit borrowers who genuinely plan for the end of the term. They suit nobody as a way to make an unaffordable car look affordable. If a salesperson leads with the low repayment, always ask what the total amount repayable is over the full term, balloon included.
Free, instant, and no details required — see roughly what lenders could approve for you.
The advertised rate is the headline. The comparison rate is the legally required figure that folds most fees — application fees, ongoing account fees — into a single percentage, calculated on a standardised loan example. It exists precisely because a low advertised rate with heavy fees can cost more than a higher rate with none.
When weighing up car loans:
A gap of more than a few tenths of a percent between a loan's advertised and comparison rate is a signal to read the fee table closely. Our car loan calculator lets you model repayments across different amounts, rates and terms so you can see what a difference in rate actually means in dollars.
Pre-approval means a lender has assessed your income, expenses and credit file and agreed in principle to lend up to a set amount, usually valid for around 90 days. Walking into a dealership with finance already arranged changes the entire dynamic.
Without it, you are negotiating the car price, the trade-in and the finance all at once, against a business development manager who arranges loans every day. With pre-approval, the finance is settled and you can negotiate the car price alone — and simply give the dealer's finance desk the chance to beat the deal you already hold. Sometimes they will; often they will not. Either way, you win.
Pre-approval also sets an honest budget before emotions get involved, and it means one considered credit enquiry rather than a rushed application at the desk. We cover the dealership dynamic in detail in our guide to beating dealer finance.
Budget for the whole picture, not just the repayment: comprehensive insurance (usually required by the lender on a secured loan), registration and stamp duty on the purchase, servicing, tyres and fuel or charging. Lenders assess your ability to repay under responsible lending obligations, but they do not budget for your running costs — that part is on you. A repayment you can only just cover leaves no room for the first big service bill.
A broker can compare secured car loans across a panel of lenders, check whether the car's age or a proposed balloon creates problems, and arrange pre-approval before you go car hunting. If you are getting ready to buy, get in touch and we can line up the finance before the test drive.
For most buyers, secured is better because the vehicle acts as security and the rate is lower. Unsecured suits situations where the car is too old for lenders to accept as security or the amount is small. The trade-off with secured lending is that the lender can repossess the car if you default, and you cannot sell it outright until the loan is cleared.
Policies differ, but many lenders work off the car's age at the end of the loan term — commonly around 10 to 12 years. An older car may still be financeable over a shorter term, or via an unsecured personal loan at a higher rate. A broker can quickly tell you which lenders will accept a specific vehicle.
Not inherently — they lower monthly repayments and are common in business vehicle finance. But you pay interest on the balloon for the whole term, and the lump sum must be paid, refinanced or covered by selling the car at the end. They become a problem when used to make an unaffordable car look affordable, or when the car ends up worth less than the balloon owing.
The advertised rate is the headline interest rate alone. The comparison rate includes most upfront and ongoing fees, expressed as a single percentage on a standardised example loan, so it gives a truer picture of cost. Always compare loans using their comparison rates, and still check the fee schedule for charges the standard example may not capture.
A pre-approval application typically places one enquiry on your credit file, which has a small and short-lived effect. That is far better than making multiple rushed applications, or applying at a dealership desk without knowing whether you qualify. One considered application, then buying within the pre-approval window, is the credit-friendly approach.
Usually yes, but check the contract first. Variable-rate car loans generally allow extra repayments freely, while fixed-rate loans may charge early termination or break fees. If you expect to repay ahead of schedule or sell the car before the term ends, weigh those fees when comparing loans — a slightly higher rate with free early repayment can work out cheaper.
This article is general information only and doesn't consider your personal objectives, financial situation or needs — it isn't personal credit advice, and lending criteria, rates, fees and government schemes change. Before acting, speak with a licensed MakeMyLoan broker or credit representative who will assess your circumstances and provide a credit guide before any credit assistance is given.
