90% of new cars are bought through finance in Australia. But not all countries share the same enthusiasm for car loans. Here’s why so many people in Australia buy cars with loans.

Why do so many people in Australia buy cars with car loans?

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Did you know that financing cars is more common in some countries than others?

Estimates put China, for example, at having 45-50% of car purchases made under finance. In the US, around 80% of cars are bought through loans. India also reports similar numbers to the US.

In Australia, 90% of all car sales are arranged through finance.

So, why do so many people in Australia buy cars with car loans?

There are a few reasons;

Cars depreciate in value

Many people decide that using their savings to buy a car that depreciates in value isn’t something they want to do with their money. Instead, people often use savings for investments or simply emergency / backup funds.

Some borrowers comment that earnings from savings used for investments actually pay for any fees and interest that the car loan might attract.

Purchasing a car through finance allows borrowers to use savings as they see fit and get that new car they need.

Safety / new car without waiting

Buying a late-model car with the latest safety features is something many drivers opt for.

Modern vehicles have significantly improved safety designed to keep occupants safe.

Comparing a 25-year-old car with a 2021 model;

1996 Toyota Camry

2021 Toyota Camry

ABS Brakes


Adaptive Cruise Control

Autonomous Emergency Braking (AEB)



Front passenger

Side Curtain



Blind Spot Warning

Lane Keep Assist

Pedestrian / Cyclist Detection

Reverse Camera

Stability Control

(25 years of Camry refinement have made some big changes)

Borrower options and protection

Australia has some of the most borrower-friendly regulations around. Some people avoid taking out loans as they worry what might happen if they don’t or can’t make the repayments.

Lending institutions view their borrowers as customers. This means they want to offer excellent customer service - just like any business does. When a borrower’s circumstances change, lending institutions work with the borrower to find solutions. This has especially been the case during the COVID-19 pandemic.

If a borrower experiences difficulty making repayments, they’ll contact their lending institution to find a solution.

In Australia, it’s very rare for a borrower to have their car repossessed. Typically, serious action is only taken in the event that a borrower cuts communication with their lender and stops making repayments, again, a very rare situation.

Balloon payments

Some loan products offer balloon payments. Balloon payments are payments made at the end of a loan. A large balloon payment can significantly lower the loan amount and scheduled repayments. Many borrowers sell their vehicle at the end of a loan term and use those funds to pay the balloon payment.

More common questions

What are interest rates based on?

  • They are based on a borrower’s personal financial situation and the vehicle being purchased.

Can I get a car loan if I already have a personal loan?

  • Yes, you can. However, depending on circumstances, it may reduce your total loan amount.

Can sole traders get car loans?

  • Yes, they can.

Do I need a driver’s licence to get a car loan?

  • No, but you need an official photo ID – like a passport or Proof of Age card.

What are the visa requirements for a car loan?

  • Generally, you must have a working visa (temporary working visa) or Skilled / Regional Skilled Visa with enough time remaining to pay off the loan, Permanent Residency (PR) or citizenship.

At the end of the day

Buying a new car is a big decision. Whatever you decide to do, the end result should be something you’re proud of and happy and safe to travel in. If you'd like more information or to talk to a professional about options tailored to your circumstances, start with a quick quote today.

For many motorists, when their car becomes a chore to drive rather than something to look forward to, it’s a sign that neglect and repairs might be around the corner.

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