If you’re looking to buy a new car as a young driver, then you’re probably also looking for the best car loan that considers your needs. There are a variety of options in the car loan market that can provide you with the finances necessary to acquire a car, but not all of these loan types would be effective for your situation.
Young drivers are most likely at a stage where budget and time are constrained, and if that is your situation, securing a car for your personal needs requires you to be mindful about the car loan option you choose.
A great car loan will give you the freedom of travelling from point A to B while maintaining a financial cushion that aligns with your budget. Conversely, a bad car loan agreement can suck away your time, finances and push you in spiraling debt if you’re not careful.
To ensure you’re not getting the bad end of the stick, it’s essential to know your financial and loan options as a young driver. This guide will shed light on the best car loan options that young drivers can get in Australia, along with ways to maximise your chances of accessing low-cost, high-value car loans.
5 Factors of a Good Car Loan
A good car will not only provide you with a high loan figure, but it will also take into account various other considerations that align with your financial situation, goals and unique, tailored needs.
Understanding what you will need when you decide on car loan providers can help you find a loan that is optimal for you and can be more favourable in the long run. While initially it may seem like a loss, finding a great car loan can put you at a financial advantage while still benefiting from having a vehicle registered under your name.
Here are some key features of a car loan that you should look out for:
- Low interest rates: The lower the interest rates, the easier it will be for you to pay off your loan. Plus, low interest rates closely mimic the actual value of the loan, making it more predictable for you to pay off.
- Flexible repayment terms: A good car loan offer also has a touch of flexibility that it can provide to applicants. This can come in the form of weekly, bi-weekly, or monthly options. They’ll also allow loan terms to stretch as short or as long as you want, whether it’s one year or ten.
- Low processing fees: A good car loan won’t bombard you with excessive pre-application fees, whether it’s administrative fees or front-loaded interest rates for fixed loans. It’s charged at a low and manageable rate for prospective applicants.
- Reasonable downpayment requirements: Good loan agreements won’t demand a high upfront payment—they’ll keep it within reason.
- Pre-approval option: A good loan would also provide you with a price range based on an initial assessment of your profile. This will help give you an idea of their value before signing any contracts.
4 Car Loan Options for Young Drivers
Young drivers have different needs when it comes to their preferred vehicle option.
One look at their fundamental profile can reveal a few commonalities among this demographic: an early-stage income and budget, a non-family-sized car type, and a general commitment to sustainable products.
The following loan products consider these preferences. Here are four car loan options that may be especially suitable for young drivers.
1. Best Low Credit Car Loan: Azora Car Loan
Most car loan providers typically assess an applicant’s overall profile before deciding on whether to hand out a car loan to their prospective client. A critical aspect of a borrower’s profile that lenders assess is their credit score.
A credit score is a numerical value that roughly gauges a borrower’s ability to repay their debt. The higher it is, the more “secure” a borrower they are, which can grant them more favourable interest rates and a higher chance of approval.
On the other hand, if a borrower has a bad credit score, this can be a hit against their credibility, which can make them less likely to get their application processed by the lender. At the very least, they could still be approved, but the interest rates may not be favourable.
Many car loan providers assess individual applicants based on these criteria. So if an applicant has a poor credit score, which is often the case for young people with no financial standing or poor repayment history, then they’d have a much harder time getting a loan. This is simply for the protection of the lender.
That said, there are some notable exemptions. One major one is bad credit car finance options offered by Azora. This service allows people with a low credit standing (such as newly minted professionals) to access car loans at reasonable rates.
Of course, just like other car loan applications, eligible applicants must prove a consistent source of income and be 18 years of age and older. But once these conditions are proven, then applicants can easily access loans despite a lesser-than-average credit score.
2. Best Fixed Rate Car Loan: MOVE Bank New Car Loan
Another good car loan that individuals can access in Australia is MOVE Bank’s new car loan. This car loan provides a consistent and competitive fixed interest rate of 6.25% per annum for vehicles up to 3 years old. What makes this vehicle loan favourable is that users can borrow up to $150,000 with 1 to 7 years of repayment terms.
This makes this car loan very predictable and easy to track, making it a good car loan to get if the monthly repayment value fits your cash flow. Repayment options for this car loan can be weekly, fortnightly, or monthly, granting even more flexibility to users who want to avail of this car type.
3. Best Green Car Loan: Loans.com.au Variable Green Car Loan
It’s no secret that the average hybrid or electric car costs more than an ICE vehicle, both in terms of upfront payments and loan or installation-based payments.
However, there are some ways customers can bring down the cost of owning a green car. One particularly effective method is to choose a competitive green car loan like one from loans.com.au.
If you want to access a flexible loan type for your electric vehicle, this variable loan is a good candidate. That said, just be aware that there are interest rate fluctuations over the loan term that may increase the overall cost of the loan over the time period, so try to compare prices to current loan offerings.
4. Best Used Car Loan: Heritage Bank Loan
As a young driver, it’s likely that your budget isn’t enough to cover the normal cost of new vehicles, even with a loan agreement.
Fortunately, there are existing car loans that are specifically made to help borrowers get used cars on a loan agreement. The Heritage Bank loan is one such loan structure, and it’s arguably one of the best bank loans in Australia as a wide range of vehicle purchases are covered.
Furthermore, this car loan offers no penalties for extra repayments, making it ideal if you want to pay more ahead of time to get through the loan more quickly. In any case, this bank loan type is great for young professionals who want a flexible payment structure for their next used car purchase.
Written By
Matt Banks
Matt is the founder of Autohero.com.au and has been hooked on cars ever since childhood.
A veteran in automotive since leaving school, Matt has completed his trade as a panel beater and is across all things with wheels.
His first car was a 1967 FORD XR Wagon followed by a string of collectable Holden’s.
Have a question for Matt? leave a comment below.