Buying a new or used vehicle is a significant purchase, and paying the full amount upfront isn’t always practical. Vehicle finance allows you to spread the cost over regular repayments while getting access to the car you need.
“How much can I borrow for my next car?”
From comparing lenders to understanding interest rates and loan terms, there are several factors that can influence the cost of financing a vehicle.
Vehicle finance can make purchasing your next car more manageable.
Whether you’re upgrading your current car or purchasing your first vehicle, understanding your finance options can help you choose a loan that suits your budget.
How vehicle finance works
Vehicle finance allows you to borrow money to purchase a car or other eligible vehicle, with repayments made over an agreed period.
Depending on the lender, vehicle finance may be available for:
- New cars
- Used cars
- Electric and hybrid vehicles
- Motorcycles
- Other eligible personal vehicles
Most vehicle loans involve regular repayments that cover both the amount borrowed and the interest charged. Loan terms, repayment frequencies and interest rates can vary between lenders.
Financing a new vs used vehicle
Both new and used vehicles can be financed, although the purchase price, vehicle age and lender requirements can affect your options.
New vehicles may offer:
- Manufacturer warranties
- Updated safety features and technology
- Lower maintenance costs during the early years
- Access to certain lender finance products
Used vehicles generally have a lower purchase price, potentially reducing the amount you need to borrow.
When financing a used vehicle, lenders may consider:
- The age and condition of the car
- Its market value
- The available loan term
- Whether it’s purchased privately or through a dealership
According to the Australian Bureau of Statistics, new personal loan commitments for road vehicles reached approximately $4.7 billion in the June 2026 quarter. For buyers planning a vehicle purchase, comparing finance options remains a useful way to manage upfront costs and spread repayments over time. (Source: Australian Bureau of Statistics)
Vehicle finance options explained
There are several ways to finance a vehicle, depending on your circumstances and whether the car will be used for personal or business purposes.
Common options include:
- Secured car loans: The vehicle is used as security, which may allow access to lower interest rates
- Unsecured personal loans: Don’t require the vehicle as security but may have higher interest rates
- Dealer finance: Arranged through a dealership, with rates, fees and conditions that can vary
- Business vehicle finance: Available for eligible vehicles used in business operations
Each option has different repayment structures, borrowing conditions and costs.
Understanding vehicle finance costs
When financing a vehicle, it’s important to consider more than the advertised interest rate.
The overall borrowing cost can depend on:
- The vehicle’s purchase price
- Your deposit, if applicable
- The interest rate and comparison rate
- Loan establishment and ongoing fees
- The repayment term
- Any balloon or residual payment
A longer loan term may reduce regular repayments but generally increases the total interest paid. A shorter term can reduce interest costs while requiring higher repayments.
Some finance arrangements also allow a balloon payment, leaving a larger amount payable at the end of the loan. While this can reduce regular repayments, you’ll need to plan for the remaining balance.
Budgeting for the full cost of owning a vehicle
Loan repayments are only one part of the cost of owning a car.
Other expenses can include:
- Registration and compulsory insurance
- Comprehensive car insurance
- Fuel or electricity
- Servicing and maintenance
- Tyres and repairs
- Roadside assistance
These ongoing costs should be included in your budget before deciding how much to borrow.
The process of financing a vehicle
Understanding the vehicle finance process can help you prepare before committing to a purchase.
1. Establish your budget
Review your income, expenses and existing debts to understand how much you can comfortably borrow and repay.
2. Compare finance options
Consider interest rates, loan terms, fees and whether secured or unsecured finance suits your needs.
3. Arrange conditional approval
Depending on the lender, you may be able to obtain conditional approval before choosing a vehicle.
4. Choose your vehicle
Once you’ve found a suitable car, confirm that it meets the lender’s age, value and eligibility requirements.
5. Finalise your finance
The lender completes its assessment, confirms the loan terms and arranges payment according to the agreement.
Common vehicle finance mistakes to avoid
When purchasing a vehicle using finance, common mistakes can include:
- Choosing a car based only on monthly repayments
- Not comparing the total borrowing cost
- Overlooking insurance and maintenance expenses
- Choosing a loan term longer than necessary
- Not understanding balloon payment obligations
- Accepting dealership finance without comparing alternatives
These mistakes can increase the overall purchase cost or leave you with repayments that are difficult to manage.
A mortgage and finance broker can help you compare lenders and understand your vehicle finance options before making a purchase.
Ready to finance your next vehicle purchase?
If you’re considering buying a new or used car, understanding your borrowing options is a sensible place to start.
We can help you:
- Understand how much you may be able to borrow
- Compare vehicle finance options from different lenders
- Explore secured and unsecured car loans
- Understand loan repayments, fees and interest costs
- Navigate the vehicle finance application process