The short version
- Green car loans are for electric, hybrid and other low emission cars, often at a lower rate.
- Each lender sets its own rules for what counts as green.
- Look at salary packaging too: electric cars can be exempt from fringe benefits tax.
What counts as a green car
Each lender has its own rules. Most include fully electric cars, and many include plug-in hybrids and hybrids. Some set an emissions limit or a maximum price.
Many lenders charge less on a green car loan than on their standard car loan. If the car is for work, a novated lease can also be worth comparing, as many electric cars are exempt from fringe benefits tax.
Pros
- Lower rates. Many lenders discount loans for electric and hybrid cars.
- Lower running costs, as charging usually costs less than fuel.
- Higher limits. You can usually borrow the full price of the car.
Cons
- Only for qualifying cars. Check the lender's list before you buy.
- Electric cars cost more up front, so the loan is often bigger.
- The car is at stake. The lender can repossess it if you can't keep up.
Alternatives
- A novated lease, if your employer offers salary packaging. Payments come from your pre-tax pay, which can save tax, especially on electric cars.
- Dealer or carmaker finance. Carmakers sometimes offer very low rates on particular models, so compare the drive away price and the comparison rate.
- 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.
How to apply
You can apply for a green car loan before you've chosen the car. Pre-approval tells you your budget and lets you bargain like a cash buyer.
- Get pre-approval. Many lenders approve you for an amount first, so you know what you can spend before you shop.
- Check your rate. Some lenders give a quote with a soft check, which doesn't show as a credit enquiry.
- Have the car's details ready. Lenders need the make, model, year, VIN and the seller's details before they pay out.
- Compare the drive away price, not just the rate. A low rate can come with a higher price on the car.
- Insure the car. Lenders usually need comprehensive insurance on a car that secures the loan.
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.