Which is the Best Bank for a Car Loan? (Part 1)

Banks are one of the most convenient institutions to get a car loan if you have good credit. Aside from the high chance of approval, you can also get a low interest rate and favourable loan terms.

Countless banks in Australia offer car financing programs. The most popular ones, however, are the big banks that have been around for a century and have established strong reputations for being trustworthy.

Each of these banks provides car loan programs that may or may not be suitable for your specific needs and financial circumstances. The best one may not necessarily have the cheapest interest rate but has the most favourable terms for your situation.

Here’s a guide of what the most popular banks in Australia are offering:

Bank of Australia

The country’s central bank offers car financing for new and old vehicles up to seven years of age. The loan term is up to 7 year years for new cars and 5 years for used cars at a fixed interest rate of 6.45% per annum. The comparison rate is 6.66% per annum based on a secured loan of $30,000 for 5 years and may not include all fees.

The loan also comes with a one-time establishment fee of $150 but there are no annual fees, administration and late payment fees. However, if you purchase a Low Emission Vehicle that meets the Bank Australia Low Emission Vehicle (LEV) criteria, you can get a 1% interest rate discount on your loan and won't be charged an establishment fee. The bank also carbon offsets the emissions of your car for the life of the loan.

Your car qualifies as a Bank Australia Low Emission Vehicle (LEV) if it is:

• Pure Electric
• Plug-In Hybrid Electric
• Regenerative Hybrid
• Equipped with an internal combustion engine that produces less than 125 g / km Tailpipe C02 (g/km) as published by Green Vehicle Guide©

You have the option to make weekly, fortnightly and monthly repayment for your car loan. You can also make unlimited additional repayments without penalty.

Aside from the competitive interest rate and friendly loan terms, the eligibility requirements are also to meet. You only need to be of legal age, a permanent resident of Australia or a holder of a relevant work Visa, an existing or new customer of Bank Australia, currently not bankrupt, employed or a self-funded retiree and looking to borrow $1,000 or more.

Commonwealth Bank

One of the “Big 4” banks in the country, CommBank offers car loans both through personal and business financing.

Secured Personal Car Loans

You can borrow a minimum amount of $10,000 to buy a new vehicle or an old car that’s not older than 5 years old. The car loan is available through a secured financing scheme that uses your car as security for the car loan.

• This structure provides a low interest rate of 6.99% per annum and a comparison rate that start from 8.05% per annum based on $30,000.
• There is also an upfront fee of $250 and an ongoing monthly fee of $10, plus additional fees like late-payment fees, government charges and other electronic banking fees.
• The loan is payable over 1 to 5 years with weekly, fortnightly or monthly repayments.
• You can also make extra repayments up to an additional $1,000 per year.

Unsecured Personal Car Loans

If you don’t want to use your car as security for the loan, you can still get car financing through a variable or fixed-rate loan, which both have a specified loanable amount of $4,000 to $50,000.

• The fixed rate has terms of 1 to 7 years at an interest rate of 13.90% per annum (for loan terms of 1 to 4 years and 7 years) and 12.99% per annum for 5 to 6-year loan terms. If your loan hasn’t been repaid in full during the fixed-rate period, the Standard Variable Rate will be followed.
• The variable rate, meanwhile, now starts from 13.90% per annum and a comparison rate from 17.77% per annum based on an unsecured $30,000 loan over 5 years. This option allows you to enjoy a competitive rate and flexibility to make additional repayments at any time without a fee. Aside from the interest fees, you will also pay an upfront fee of $150 and an ongoing monthly fee of $10 will apply, plus additional fees for late payment and other electronic banking services.

Novated Lease

Commonwealth Bank provides car financing through a Novated Lease where you can lease a car through salary sacrifice.

• The bank makes a lease arrangement with your employer who deducts your monthly loan repayments from your pre-tax salary.
• You can take out a minimum $10,000 loan with no maximum amount.
• You can also offer to buy the care at the end of your lease agreement.
• If you move employers, you can transfer the lease to your new employer if they agree.

Business Loans

Business owners can get car financing from Commonwealth Bank through a chattel mortgage, hire purchase or finance lease.

• Chattel Mortgage. This is ideal if you want to own the car for business use and pay it off straight away, list the vehicle as an asset on your balance sheet, and customise repayments with a balloon payment at the end of the agreement.
• Hire Purchase. If you're looking to hire an asset from the Bank and pay it off, this may be the best car financing deal for you. You can also claim potential tax benefits and customise repayments with a balloon payment at the end of the agreement.
• Finance Lease. This option allows you to buy the car or equipment off us at a later date. It also offers flexible payment terms and no upfront deposit. Moreover, you can claim potential tax benefits.

Macquarie Bank

Australia’s largest investment bank offers both secured and unsecured car financing for new and used cars. Borrowers like you can pay a deposit to reduce your repayments and have the option to pay a balloon payment or refinance your existing loan.

MacBank also can trade in your old car or buy a car under finance. It also provides loans for recreational vehicles, caravans or motorbikes, as well as asset and vehicle finance solutions for business cars and commercial equipment.

New Car Loans

The indicative interest rates are based on a $10,000 to $250,000 consumer loan with a term of 3 to 5 years and a 90% to 110% loan-to-value ratio.

• Secured
  Interest rate: 6.42% per annum
  Comparison rate: 7.72% per annum
• Unsecured
  Interest rate: 8.14% per annum
  Comparison rate: 9.44% per annum

Used Car Loans

The indicative interest rates are available for cars aged between 2 to 3 years on a $10,000 to $250,000 consumer loan with a term of 3 to 5 years and a 90% to 110% loan-to-value ratio.

• Secured through a Dealership
  Interest rate: 6.92% per annum
  Comparison rate: 8.22% per annum
• Unsecured through a Dealership
  Interest rate: 9.01% per annum
  Comparison rate: 10.31% per annum
• Secured through a Private Seller
  Interest rate: 7.72% per annum
  Comparison rate: 9.02% per annum
• Unsecured through Private Seller
  Interest rate: 9.81% per annum

ANZ

ANZ does not currently offer new secured car loans, but you can use the (unsecured) ANZ Personal Loan to finance your car purchase. This loan can be a variable or fixed rate. The loanable amount is between $5,000 to $50,000 and payable between 1 to 7 years.

• The variable interest rate starts at 15.99% per annum and a comparison rate of 16.84% per annum (based on a $30,000 Personal Loan for a five-year term and may not include all charges). It offers the flexibility to increase your loan amount and doesn’t require exit fees if you pay your loan off early.
• The fixed interest rate is at 12.45% per annum and 13.32% per annum (based on a $30,000 Personal Loan for a five-year term may not include all charges). It gives you control over your budget because of the assurance that the repayment amount won’t change throughout your loan.

Additional fees include a one-time loan approval fee of $150 and a monthly $10 loan administration charge that’s debited every three months until the loan is closed in ANZ systems.

National Australia Bank

NAB offers personal loan and business vehicle and equipment finance for Aussies or and those with Australian Permanent Resident or a non-resident holding an acceptable Temporary Residency Visa with a regular source of income.
You can borrow from $5,000 to $55,000 with loan terms from 1 to 7 years and fixed or variable interest rate options. The associated fees include a one-time application fee of $150 and a monthly fee of $10.

Personal Car Loan - Fixed and Variable Rates

Interest rate: 12.69% (Rate can range from 10.69% to 18.69% per annum)
Comparison rate: 13.56% p.a. (Rate can range from 11.58% to 19.53% per annum)

Business Vehicle and Equipment Finance

Available for businesses with a valid Australian Business Number (ABN) and have 12 months of reconciled business financial data from your accounting package, these loans have online fixed rates from 5.49% per annum on cars, vans and utes and $0 deposit on loans up to $150K. The car serves as security for the loan.

The bank also offers:

• Novated Lease
• Finance Lease
• Hire Purchase

Wespac

Australia's first bank and oldest company provides personal car loan and vehicle and equipment finance for businesses.

Personal Car Loans

You can borrow from $10,000 to $100,000 for a new car or used car of up to 7 years old if you pledge your car as collateral for the loan. If unsecured, you can borrow from $4,000 to 50,000 for a new car or used car of any age. Both have loan terms of 1 to 7 years.

Key rates include:

• Annual fixed interest rate: 8.49% per annum
• Comparison rate: 9.67% per annum

The one-time establishment fee is $250 and the monthly service fee is $12. Other fees may be payable.

You can choose a repayment frequency of weekly, fortnightly or monthly. You can also make extra repayments to pay your loan off sooner, but a prepayment fee may apply.

Business Vehicle and Equipment Finance

Westpac offers business car loans both for customers and non-customers for an amount between $15,000 and $10,000,000 that’s payable in 1, 3 or 5 years. The interest rates differ according to the equipment or vehicle age and terms of the loan.

You have 3 car loan options to choose from:

• Finance lease
• Commercial loan (chattel mortgage) - With a fixed interest rate
• Commercial hire purchase

The associated fees include a one-time establishment fee of $420,000 for a loaned amount of $450.00 or less and 0.1% of the amount financed plus $30.00 for more than $420,000. Other charges, including government duties and GST, may also apply.

The repayment frequency can be monthly, quarterly, half-yearly, annually or structured as negotiated. Fleet owners can take advantage of the revolving limit. You can also pay the residual value for finance lease or choose a balloon payment for commercial hire purchase or commercial loan.

To qualify, you have to be in the business for at least 1 year. If you're a Westpac customer, you won’t need to provide your financial history as long as you have a good credit history, valid ABN and no outstanding statutory payments.

Bank South Australia

The largest bank in South Australia offers vehicle loans for personal and business use. You can borrow from &2,00 up to $80,000 on personal loans and a minimum amount of $15,000 for a business car loan.

Personal Car Loans

Personal Car Loans can be secured or unsecured with fixed or variable interest rates. Your loan interest rate varies depending on your credit assessment and financial history assessment. As a result, your interest rate may differ from other borrowers and may differ.

Loanable Amount: $3,000 to 80,000 for Fixed Rate; $2,000-$40,000 for Variable Rate
Fixed and Variable Interest Rates: Starts at 12.99%
Comparison rate: Starts from 14.06%
Loan Terms: 1-5 years for Fixed Rate, 1-7 for Variable Rate

• Minimum finance amount $15,000
• Terms from 1 to 7 years
• Flexible repayment terms

Business Car Loans

A division of Westpac Banking Corporation, Bank SA follows the same business car loan structure of Westpac, which requires a minimum finance amount of $15,000 and a maximum amount of 10,000,000. Unlike Westpac that has a maximum loan term of only 5 years, Bank SA offers loan terms of 1 to 7 years. with flexible repayment terms, including:

• Goods loan
• Hire purchase
• Finance lease
• Novated lease

To qualify, your business must be registered in Australia.

Your bank financing options may also be limited by the type of car you want to buy. Some banks won’t finance cars over a certain age or mileage. If you plan to purchase an older used vehicle, you may have difficulty finding a bank that will give you a car loan.

Before looking for a new or used car from a car dealer or private sellers, it's smart to get finance pre-approval. This will help you understand what you can afford and set a clear budget.

Still can’t find the best car loan deal for you? Check out these 5 more banks with great car loan programs.

Positive Lending Solutions is an award-winning online asset finance broking solution in Australia. We have access to dozens of premium lenders, including some of the country’s largest and oldest banks.

To learn more about car loan deals, call 1300 722 210 or request a Car Loan Pre-Approval.

See also:

• How to Calculate the Finance Charges on a Car Loan
• The Cheapest Ways to Get an Auto Loan
• What Credit Score Is Required to Buy a New Car?