How to Compare Car Loan Rates: Advertised vs Actual

When you start looking for a car loan, it’s easy to get drawn to the advertised interest rates.  But here’s the catch: most lenders show a range of rates, not the exact rate you’ll get. Your  actual rate depends on your personal situation.  

The riskier a loan looks to the lender — for example, if you have a shorter credit history or  higher debt — the higher your interest rate is likely to be. That’s why advertised rates should  be taken with a pinch of salt.  

To give you an idea, the Reserve Bank of Australia reports that the average fixed-term  personal loan rate (including car loans) is around 9.68% p.a. So, even if a lender advertises  “rates from 5%,” most borrowers will pay more than that.  

The key to getting the best rate is comparing personalised quotes. Don’t just look at the  number on the screen — make sure you understand what you’re actually likely to be offered.  

At Finance Finance Finance, we can help you get these personalised quotes and explain  why one lender’s rate might be higher than another. That way, you can make a confident,  informed choice about your car loan.  

10 Factors That Determine Your Actual Car Loan Interest  Rate  

When it comes to car loans, the interest rate you see advertised isn’t always what you’ll get.  Lenders consider many factors before finalising your rate. Here’s what really matters:  

1. Your Credit Score  

Your credit score is one of the biggest factors lenders consider. Borrowers with high credit  scores usually qualify for the best rates. Those with lower scores may still get a loan, but at  higher interest rates and stricter terms.  

Tip: Avoid multiple loan applications in a short period, as this can hurt your credit score.  

2. The Age and Type of Car  

 New and demo cars generally attract the lowest interest rates.  

 Electric vehicles (EVs) and plug-in hybrids (PHEVs) often have discounted rates —  around 40% of lenders offer this.  

 Used car rates may increase depending on the vehicle’s age.  

 Other vehicles like vans, utes, trucks, motorcycles, and boats may have different rates. 

Fact: Most borrowers in our database were applying for cars (79%), followed by utes (12%),  motorcycles (7%), and vans/trucks (2.5%).  

3. Car Loan Term  

Car loan or personal loan terms usually range from 2 up to 7 years. Most borrowers  choose a 5-year term, which balances manageable repayments with overall interest costs.  Some extend their loan to 6–7 years to stay within their budget and afford the car they’ve  been dreaming about.  

Longer terms mean smaller repayments, but you’ll pay more interest over the life of the  loan. The good news is that if your loan allows extra payments, even small additional  amounts — $500 or $1,000 when you have extra funds — can reduce both the loan term and  total interest paid.  

By keeping up your regular weekly, fortnightly, or monthly payments and topping up when  possible, you can pay off your loan faster and save money on interest, making a longer term loan more flexible and affordable.  

4. The Lender You Choose  

Before putting a loan into the system, Sharyn from Finance Finance Finance will review all the  options available to help you get the best deal for your situation. With access to over 40  lenders, we make sure you’re matched with a loan that suits your budget and lifestyle. 

5. Fixed vs Variable Rate  

Most car loans in Australia are fixed rate (about 69%). Fixed rates are currently often lower  than variable rates, which can indicate expectations of falling interest rates in the economy.  

6. Your Financial Position  

Lenders favour borrowers who:  

 Have a high, stable income (average $120,481 in our data)  

 Have low expenses relative to income  

 Maintain low levels of debt 

7. Employment Status  

Full-time and part-time employment can help secure a lower rate. Casual employees need to  have been in the role for a least 4 to 6 months to get a lower rate. Of course, this is not the  only factor in getting a decent rate but it is a great factor in the process.  

Tip: ABN holders using the vehicle mainly for business can apply for ABN car loans, which  have different rates.  

8. Property Ownership  

Owning property — especially with significant equity — can lead to lower car loan rates.  Lenders see property owners as less risky.  

Fact: Around 24% of Australians who finance a car are homeowners with a mortgage.  

9. Loan Amount  

The size of your loan can affect the rate:  

 High-risk borrowers may pay more for larger loans.  

 Low-risk borrowers might qualify for lower rates on bigger loans, similar to home  loans.  

10. Loan-to-Value Ratio (LVR)  

The loan-to-value ratio (LVR) is the percentage of the car’s value that you’re borrowing.  

 A higher LVR — borrowing a larger portion of the car’s price — usually means a  higher interest rate.  

 Some lenders may even allow you to borrow more than 100% of the car’s value. For  example:  

o Buying an electric vehicle plus a home charger and battery.  

o Using your current car as additional security to increase borrowing on a new  vehicle.  

Tip: A lower LVR generally reduces your interest rate and shows lenders you’re less risky.  

Bottom Line: 

The advertised car loan rate is just a starting point. Your actual interest rate depends on  your personal financial profile, the car you choose, and the lender. Comparing personalised 

quotes through Finance Finance Finance is the smartest way to get the best deal — without  affecting your credit score.