How much can I borrow for a car loan?

Determining how much you can borrow for a car loan is based on how much you earn, how much you spend each month, and your credit habits. This calculation is used to figure out your borrowing power – how much you can afford to pay back to a lender each month or repayment period.

How do I figure out my borrowing power?

According to the Australian Bureau of Statistics, by the end of 2018 Australians had financed vehicles to the tune of $1.23 billion. ASIC MoneySmart says the average car cost in Australia is $27,994 with the average loan amount totalling $18,049.

Your borrowing power is determined by looking at your income and expenses and seeing what is left over to service (pay back) a loan.

Let’s take this as an example: If you earn $100,000 a year and spend about 60% on essentials like rent/mortgage, bills, groceries, etc. this means you have $40,000 in disposable income. You may use about 20% of that on disposable purchases like nights out, movies, sports days, holidays, etc. This leaves you with $20,000 left over.

$20,000 in disposable income could demonstrate you can comfortably pay back a $50,000 loan over five years without running into any financial difficulty (provided you don’t lose your job, fall ill, etc.)

Using this example, if you take out a five-year loan for $50,000 with a $4,000 deposit, your borrowing power ranges between $868-$1,047 per month. Owing more each month might put you in financial trouble, which a lender is bound by law not to do.

A lender will not simply lend out $300,000 for a luxury vehicle to someone who earns $50,000 a year, even if their credit is spotless – this would put the borrower at risk.

What is creditworthiness? Is it tied to my credit score?

Yes – creditworthiness is expressed as a credit score by the major credit reporting agencies. ASIC MoneySmart says a credit score is “a number based on an analysis of your credit file, at a particular point in time, that helps a lender determine your creditworthiness.”

Your credit score is an aggregate or expression of how risky you might be as a borrower. Your credit history will list which lenders you owe money to and how much, how much credit you have borrowed, how many times you’ve applied for credit, unpaid debts or maxed out credit, and any court orders or agreements related to unpaid debts or bankruptcy.

Most credit agencies, the bodies that prepare your credit reports, give you a score between 1200 and 0. (Some provide a number between 1000 and 0.) If you have a high score, you are deemed more “credit worthy.” If you have a low score, you are more of a risk and may be in the “bad credit” or “below average” category. For example, applying for credit in many places and being rejected shows lenders you may be desperate for credit and could have trouble paying them back. This all drops your credit score.

This can hinder your attempts for credit approval and may mean you have to prove your creditworthiness in other ways. Even so, lenders may only give you a loan with a higher interest rate as this is “insurance” against not being paid back (known as defaulting.)

Calculate your car loan repayments

LenderProduct NameAdvertised RateComparison RateMonthly Repayment
SavvyNew Car Loan2.85%
fixed
3.93%$537.06
Bank of AustraliaUsed Car Loan6.45%
variable
6.66%$586.28
ANZOnline Secured Car Loan7.85%
fixed
8.70%$606.14
CUAFixed Rate Car Loan7.99%
fixed
8.29%$608.15
BankSASecured Fixed Personal Loan8.49%
fixed
9.39%$615.35
St GeorgeSecured Fixed Personal Loan8.49%
fixed
9.39%$615.35
CBASecured Car Loan8.49%
fixed
9.54%$615.35
NABVariable Rate Personal Loan14.19%
variable
15.06%$701.01

* Consumer loan with the loan amount of $40,000 is looking at a 5 year secured fixed rate of 2.85% p.a. and comparison rate of 3.93% p.a.. WARNING: all fees and charges may not be included on the example above, only the comparison rates, monthly repayment and total cost applies. Therefore, the total cost of the loan might be different. Comparison rate do not include broker fees, redraw fees, early termination fees and fee waivers. Comparison rate may change as a result of the different loan terms, fees and the loan amounts. Establishment fees and monthly fees do not apply to commercial loans, only consumer loans. However, there might be different fees apply.

Why choose Savvy?

Compare competitive car loans to suit your borrowing power with Savvy.

Flexible options
Savvy offers loans from 25 premier lending partners renowned for their flexible, competitive loans.
Customer acclaimed
Savvy is one of the most celebrated car loan brokers in Australia; we have a 4.5 star rating on feefo.
Personalised consultant
We use the latest in technology so you can get the best service. Have a personalised loan consultant guide you through the entire process.