Low Interest Car Loans

Tips for securing the best low interest car loan deal when financing your new car purchase.
No obligation. It won't affect your credit score.

Last updated on May 4th, 2022 at 03:55 pm by Bill Tsouvalas

Compare low interest car loans

Car loans are a great way to help borrowers bring their ideal vehicle within their reach, even if they don’t have the savings to pay for it upfront. Because of the extended time it takes to repay a car loan, it’s important to ensure you have access to the lowest rates on offer. Fortunately, you can do just that by applying with Savvy and selecting from a variety of low interest car loans.

How do I get a low interest car loan?

There are many ways to go about locking in the lowest car loan interest rates, so you should always be mindful of these when approaching the car loan application process. Some of the ways you can go about securing the lowest car finance interest rates include:

Show a positive credit history

The better your credit history, the more likely you are to be approved for the cheapest rates on car loans. This is because a high credit score indicates to a lender that you’re a responsible borrower who can be entrusted with significant loan debt and has the discipline to repay it on time and in full. Car loan financiers view applications through the lens of risk: a lower credit score, in theory, poses a greater risk of default than a high one, so they set their rates higher to compensate for that increased risk.

Maintain a stable income and permanent employment

Part of making sure your lender is confident in your ability to comfortably repay the loan across your term is showing that you aren’t at risk of losing your job and running out of funds. Remaining in the same position for upwards of three to six months prior to your application and completing your probationary period will benefit you significantly, particularly if you’re full-time or permanent part-time. Additionally, receiving a consistent, comfortable income which is enough to support your repayments on top of your regular expenses will boost your chances of approval for the lowest car finance rates.

Choose a brand-new car

Because car loans utilise the vehicle you buy as security, your rate will be lowered the newer it is. This all comes down to potential resale value: brand-new cars and those less than three years old at the point of purchase are more valuable and less likely to fail for whatever reason than an older car. Lenders always prefer vehicles in this zero- to three-year age bracket, so selecting from this range is likely to result in a lower rate (albeit not substantially lower than a used car in good condition).

Opt for a longer repayment term

In most cases, the lowest interest rates are offered by lenders to borrowers who select a longer repayment term. You can decide on whether to repay your car loan debt over a term of one to seven years, with the longer terms generating greater overall interest for the lender. Because of this, interest rates on shorter terms are generally higher. It’s important to consider which is best for you and what term length ensures the balance between the most manageable repayments and the lowest car loan interest rates.

Own property

Lenders prefer borrowers who are asset-backed, meaning they own a significant asset (most commonly property) and have repaid it in full or are in the process of repaying it. If you own your home, your chances of locking in the lowest available car finance interest rates will be boosted by some margin. If you don’t own a home, you may also help your chances of a low interest rate by showing evidence of substantial savings, known as “cash at bank”, which can have the same effect as property (albeit not as effective).

Have a similar loan repaid previously

Finally, showing your lender that you’ve repaid a similar car or personal loan in the last few months or years is verifiable proof that you’re capable of taking on the responsibility of repaying a significant loan debt on time and in full. Lenders will reward borrowers who can prove that they pose little risk by lowering interest rates, which will help you save a substantial amount over the life of your loan. This is especially relevant for borrowers buying their first car, as they won’t be able to draw on any successful car loan repayment history but can show their discipline through past personal loans or credit card repayments, among other areas.

How do I work out whether my interest rate is the best available to me?

Perhaps the most important thing above all else when it comes to securing low (or the lowest) car finance interest rates is to compare options in the market. By taking the time to consider a greater number of offers, you can inform yourself of the options currently available and, as a result, make a more educated decision on which is the cheapest and best for you. You can do this yourself, surveying the market by looking into various lenders and their offers, but it’s not always the most time-effective way to go about it.

Savvy takes all the guesswork out of picking the car loan with the lowest interest rate. Once we receive your application, one of our expert consultants will get to work comparing an array of loans from our partnered lenders to find the cheapest on offer for you. They’ll consider your personal preferences for your car loan, such as car age restrictions and features such as flexible repayment schedules, and return to you with the best car loan offer available. By completing your application with Savvy, you can position yourself most effectively to capitalise on low interest rates.

Top tips for reducing the cost of your car loan

Reduce your loan size

The less you borrow, the less interest you’ll have to pay overall. Therefore, minimising the size of your loan will help you cut down on the cost of your loan. You can do this by choosing a cheaper car or by simply paying for a portion of the vehicle’s purchase with your own savings as a deposit.

Choose a shorter loan term

Although longer terms often come with lower rates, shorter terms will result in a lower overall interest bill, even if the rates are slightly higher. The sooner you pay off your loan, the less interest you’ll pay (due to the way it’s calculated), so you’re better off selecting a shorter loan where possible.

Compare using comparison rates

It’s not just interest that you have to consider when it comes to the cost of your car loan: you should always pay close attention to the fees which are charged. With monthly fees of up to $20 and application fees up to around $600, finding a deal with a low comparison rate can make a big difference.

Refinance to a better deal down the track

If you can’t quite lock in the interest rate you were looking for, you can always pay down your loan for a couple of years and look to refinance to a better interest rate. This is especially the case if your credit score wasn’t amazing at the start of your car loan, as making repayments will help you qualify for a better rate next time.

Common low interest car loan questions

Can I still get a low car loan interest rate if I’m a casual worker?

Yes – car loans for casual workers are still available at low interest rates, provided you meet the eligibility criteria required for the loan. For instance, lenders will generally require casual applicants to have been in the same job and working consistent hours for at least six to 12 months, earning enough to cover their living expenses on top of their car loan repayments with room to spare. If you’ve only been at your place of employment for a short period, you may have to apply to a specialist lender, whose base rates are often higher.

Are low interest rates available to borrowers on disability benefits?

Yes – again, provided you can meet the criteria required to access the lowest rates, you may be able to get approved for a cheap rate on your car loan on disability benefits. However, not all lenders will accept pensions as income, so you may find that those which do charge a premium to do so. You can speak to your Savvy consultant about your options when you get a quick quote.

Will my industry help me get a better rate?

It can – certain professions are considered safer than others when assessing applications. For example, car loans for lawyers, doctors and healthcare workers are more likely to come with lower interest rates due to the lower risk they present as professions with stable and mid to high income.

Can I get a low interest classic car loan?

The interest rate offered on the purchase of a classic car won’t be as low as it would be on a new car, but there are affordable interest options available from specialist lenders in the market. Your car will also likely have to meet strict qualification criteria, particularly if it’s over 20 to 25 years old.

What’s the minimum amount I can borrow for my car loan?

Most car loans start from a minimum of $5,000. This gives you the ability to purchase any type of car you like: a cheaper used car listed at $5,000 or putting forward any sort of deposit (or not) for mid-priced or luxury vehicles. There’s no real maximum amount when it comes to applying for car loans with Savvy; as long as you can show that you’re able to support its repayments, we can help you get approved.

Does it matter where I live in Australia when finding the cheapest rates?

No – because Savvy’s car loan process is 100% online, we also partner with lenders who operate over the internet and are therefore able to help you out no matter where you live. Regardless of whether you live in a capital city or out in the country, whether you live in WA, SA, ACT, Victoria, Queensland or anywhere else, we can help you find the car loan you’re looking for.