The short version
- A $30,000 car loan is usually secured against the car, which keeps the rate down.
- A shorter term means higher repayments but less interest.
- Compare the comparison rate and the fees, and the drive away price of the car.
What a $30,000 car loan costs
Your repayments depend on the rate you're offered and how long you take to repay. These examples leave out fees and any balloon payment:
- At 7% a year: $926 a month over 3 years, $594 a month over 5 years, $453 a month over 7 years.
- At 10% a year: $968 a month over 3 years, $637 a month over 5 years, $498 a month over 7 years.
- At 14% a year: $1,025 a month over 3 years, $698 a month over 5 years, $562 a month over 7 years.
Choosing the term
A longer term lowers each repayment but means paying interest for longer. Try to pay the loan off before the car is worth less than you owe on it, which matters if you might sell or trade in the car early.
Pros
- Lower rates. The car secures the loan, so lenders charge less than for unsecured loans.
- Higher limits. You can usually borrow the full price of the car.
- Set repayments, so you know when the car is paid off.
Cons
- The car is at stake. The lender can repossess it if you can't keep up.
- Rules on the car. Many lenders limit how old it can be and need comprehensive insurance.
What to check on a car loan
Look at the comparison rate as well as the interest rate. The comparison rate adds the lender's standard fees to the interest rate for an example loan, so it shows the cost of two loans on the same footing.
- Whether there's a balloon payment, a lump sum left to pay at the end that lowers your regular repayments.
- Any limit on the car's age, either when you buy it or when the loan ends.
- Whether you can make extra repayments or pay the loan off early, and what that costs.
- Whether the lender pays the dealer or private seller directly.
What you'll need to apply
Most lenders ask for the same things, and having them ready speeds up approval.
- Proof of identity, such as a driver's licence, passport or Medicare card.
- Proof of income, usually your last two payslips, or tax returns and financial statements if you're self-employed.
- Details of what you spend each month and what you already owe, including credit card limits.
- Your address history and, for a secured loan, details of the asset you're offering as security.
Alternatives
- Dealer or carmaker finance. Carmakers sometimes offer very low rates on particular models, so compare the drive away price and the comparison rate.
- A novated lease, if your employer offers salary packaging. Payments come from your pre-tax pay, which can save tax, especially on electric cars.
- An unsecured personal loan. Nothing is secured against the car, so you can buy any car, at any age, though the rate is usually higher.