Secured Car Loans

If you need to finance a new car, find a competitive secured car loan with Savvy.

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on July 2nd, 2024       

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Happy women driving in sunny car

Secured car loans are a popular option if you need to borrow money to purchase a vehicle. By tying the loan to your car, these loans can offer competitive rates and greater chances of approval, making them an attractive choice for borrowers across Australia.

If you are looking for a secured car loan, turn to Savvy. With a panel of more than 40 lenders and experienced consultants to support you every step of the way, we can help you find the car loan you need. Get started with a free, no-obligation quote today!

What are secured car loans and how do they work?

Secured car loans are car loans where the vehicle you are purchasing serves as collateral. In other words, the car acts as security for the lender in case the borrower defaults on the loan. If you fail to make payments as agreed, the lender has the right to repossess the vehicle to recover their losses. This is how the secured car loan process works:

  • Find a lender: research different lenders, their terms and interest rates to find one that suits your needs and situation. You can use online comparison sites or use a car finance broker like Savvy to help you with your decision.
  • Application: you'll need to provide personal information, such as your name, address, employment details, income and information about the car you want to buy. The lender will assess your application and run a credit check to determine your eligibility for the loan and the applicable interest rate.
  • Approval: if your loan’s approved, you'll need to sign a loan agreement. This will outline the terms and conditions and include details such as the loan amount and repayment schedule.
  • Loan disbursement: once the loan is finalised, the lender will disburse the funds, typically directly to the seller. After the payment is made, you can pick up the car from the seller or dealership.
  • Repayment: over the loan term, which typically ranges from two to seven years, you'll make regular monthly repayments that cover both the principal amount (the borrowed money) and the interest accrued.

What are the eligibility requirements for a secured car loan?

Eligibility requirements for a car loan can vary between lenders, but the following will typically apply wherever you go for finance:

  • You must be at least 18 years old.
  • You must be an Australian citizen or permanent resident (though in some cases you may be able to get a car loan on a temporary visa).
  • You must have a stable income that can comfortably cover your car loan payments. This can come from employment or other sources such as Centrelink payments.
  • You must meet your lender’s credit score requirements. A better credit score will typically qualify you for better interest rates, but you may still be able to get a loan with bad credit.
  • Your car must meet your lender’s specifications regarding type, age and condition.

These criteria are designed to protect lenders and to ensure that borrowers are not burdened with a loan they cannot afford to repay. Lenders are required to follow responsible lending obligations, meaning they cannot approve applications that aren’t financially feasible for you.

How much will my secured car loan cost?

The average cost of car loan repayments in Australia was $210.11 a week in the first quarter of 2024, according to the Australian Automobile Association’s Transport Affordability Index. However, how much your car loan costs will depend on your particular circumstances and is determined by several factors:

Car value: the price of the car you wish to purchase generally determines the maximum loan amount you can borrow.

Interest rate: this is a charge by the lender for borrowing the money, expressed as an annual percentage rate (APR). Interest rates can vary based on your credit score, the lender and the loan term. However, they are typically fixed across the loanterm.

Fees and charges: additional costs such as loan origination fees, documentation fees and early repayment fees can all impact the total loan cost.

Comparison rate: the comparison rate encompasses both the interest rate and any associated fees, providing a more accurate representation of the total cost of the loan.

Loan term: repayment terms can vary but typically range from one to seven years, usually paid in monthly instalments. Longer terms usually result in lower monthly payments but higher total interest costs.

Down payment: any amount you can pay upfront towards the car purchase will reduce the loan amount and, subsequently, the total interest paid.

Here’s an example of how these different elements can affect the cost of your car loan, for the purchase of a $35,000 car:

Scenario #1: low interest Scenario #2: high interest Scenario #3: shorter loan term Scenario #4: longer loan term
Interest rate
5%
12%
7%
7%
Comparison rate
5.5%
13.5%
7.5%
7.5%
Loan term
4 years
4 years
2 years
7 years
Monthly payment
$813.98
$947.67
$1,574.99
$536.84
Total interest & fees paid
$4,070.88
$10,488.22
$2,799.66
$10,094.53

What are the differences in cost between secured and unsecured car loans?

While unsecured loans often offer more flexibility, secured car finance is almost always the cheaper option overall. This is in large part down to interest rates: secured loans come with lower rates than unsecured loans, as they’re seen as a safer prospect by lenders. The table below demonstrates how much of an impact a small difference in interest rates can make over the course of a $30,000, five-year car loan:

Type of loan Interest rate Monthly repayment Overall cost Total saving
Secured car loan
5.5% p.a.
$573.03
$34,382.09
$1,686.22
Unsecured car loan
7.5% p.a.
$601.14
$36,068.31
N/A

*Note: estimates do not include other car loan fees that may apply.

There are fees charged for both secured and unsecured car loans, primarily in the form of establishment and ongoing fees. These come in similar ranges, with establishment fees ranging from $0 to $600 in most cases and ongoing fees charged at between $0 and $10 to $20 per month. However, when negotiating your secured car loan with your lender, there’s generally more scope for certain costs to be waived compared to unsecured loans. By applying with Savvy and speaking with one of our consultants, we can help you secured the most affordable car loan deal for your needs.

How can I find the best secured car loan?

With so many options on offer, choosing a car loan can feel overwhelming. If you’re looking for a loan, here are some tips to for finding the best deal you can:

  • Set your budget: before you start searching for a car, you need to know how much you can comfortably afford to pay each month. This will prevent you from overextending yourself and help you set realistic expectations.
  • Check your credit score: your credit score significantly influences the interest rate you'll receive. Check your credit report (you can get a free credit report every three months) and, if necessary, take steps to improve your score before applying.
  • Compare lenders: research different lenders and loan options, comparing things like interest rates, loan terms, fees and eligibility criteria.
  • Get pre-approval: getting pre-approved for your car loan gives you an idea of how much you can borrow before you apply, giving you confidence when shopping for a car.
  • Speak to an expert: if you’re still unsure about which car loan option to choose or even where to start, consider seeking advice from a car loan expert like Savvy. We can assess your situation to determine what you could qualify for and help you navigate the loan process from start to finish.

Why choose Savvy for your secured car loan ?

The pros and cons of secured car loans

PROS

Lower interest rates

Interest rates for secured car loans are often lower compared to unsecured loans because there's less risk for the lender, helping to reduce the overall cost of the loan.

Higher chance of approval

As the car acts as collateral to back the loan, borrowers with lower credit scores or limited credit history may have a better chance of getting approved.

Improves credit

Making consistent and on-time loan repayments can help improve your credit score, demonstrating to future lenders that you are a responsible borrower.

CONS

Risk of repossession

If you fail to make payments, the lender has the legal right to repossess the car to recoup their losses.

Restrictions on car choice

Because your loan is secured, your car must hold enough value to recoup lost funds in the event your default on the loan. As such, there are stricter requirements on which cars you can buy.

Mandatory comprehensive car insurance

Lenders often require comprehensive insurance to be taken out on the car, which is the most expensive car insurance option and can increase your overall expenses.

Calculate your car loan repayments

Your estimated repayments

$98.62

Total interest paid: $1233.43
Total amount to pay: $5,143.99

Disclaimer:  The results provided is an estimate only. Please read our Calculator Assumptions and Disclaimer for more information

 How to prepare for your car loan application

Common secured car loan questions answered 

Can I buy a used car with a secured car loan?

Yes, you can buy used cars with secured car finance. However, conditions generally apply depending on lender, such as the age and condition of the car.

Do I need to submit hard copies of my documents?

No – if you apply for a car loan through Savvy we can process your documents electronically using our secure online portal.

How long will my secured car loan application take?

Car loan applications can move quickly. If there are no problems, many applications can be approved within 24-48 hours with the help of our expert consultants.

If I don’t pay back my secured car loan, what happens?

If you default on your secured car loan, your vehicle may be repossessed. Your loan will typically have to be over 60 days in arrears or non-payment before this process begins. If you do find yourself in financial difficulty, get in touch with your lender to discuss your options. 

What other costs do I need to consider with a secured car loan?

When buying a car, there are a number of other costs to consider beyond your car loan. These include:

  • Stamp duty
  • Registration
  • Compulsory third party (CTP) insurance
  • Car insurance
  • Fuel
  • Servicing and maintenance
Can I get a secured car loan if I use my car for business purposes?

Yes – there are no usage limits with a car loan, meaning you can use your car for personal or work purposes. You may also be able to claim tax deductions if you use a car for your work. Alternatively, depending on your situation, you could consider novated leasing or commercial products like chattel mortgages

Can I take out a personal loan instead of a secured car loan?

Yes – Savvy also offers range of competitive personal loans from its panel of lenders. However, be aware that such unsecured car loans are generally for lower amounts and typically come with higher interest rates than secured car loans.

Am I able to use anything else as security for my car loan?

In most cases, no – almost all financiers offering car loans will require you to use the car you purchase as collateral for your agreement. There may be very rare cases where a lender is willing to accept a term deposit or other high-value items as security, but you’re unlikely to be able to do this. Using your car as collateral simplifies the process.

Can I buy multiple cars with the same loan?

If you’re taking out an unsecured loan, yes – these can be used for any purpose you might need (within reason), so if you’re capable of borrowing and repaying enough to purchase two vehicles, you can do so. However, secured car loans are only designed for the purchase of a single vehicle, so you won’t be able to include multiple cars under one deal.

What are some alternative car loan options?

Secured and unsecured loans are the most common types of finance when buying cars. However, there are some alternatives out there that you may want to consider. These include:

  • Peer-to-peer (P2P) finance, which links borrowers with private lenders directly.
  • Novated leasing, which is a three-way agreement between a lender, employer and employee. 
  • Mortgage redraw, which allows homeowners with an active mortgage to use a line of credit or redraw facility to finance a car.
  • Car dealer finance, where you finance your car through the dealership. 

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