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Low interest rate car loans

Keep repayments down with a low-interest car loan.

When choosing a loan to buy a car, you want to get the lowest interest rate possible. Low-interest rate car loans are available from banks, credit unions and brokers. Dealers may also offer reasonable dealership finance to entice you to buy a car.

It always pays to compare your choices when it comes to car loans, so have a read of our guide and find out how to get a low-interest rate loan for your new or used vehicle today.

Compare car loans starting from under 9% p.a.

1 - 7 of 7
Name Product Interest Rate (p.a.) Loan Amount Loan Term Establishment Fee Requirements Table description
FAST QUOTE
Simplify Secured Car Loan
8.05% - 12.30%
$5,000 - $500,000
12 - 60 months
$100 - $500
Requirements: NZ citizen/permanent resident, income of at least $500/month.
See how much you could borrow without affecting your credit score.
MTF Finance Secured Car Loan
10.50% - 22.50%
$2,000 - $100,000
3 to 60 months
$376
Requirements: NZ citizen/permanent resident or have a work visa, have a regular source of income.
Secured car loans from $2,000.
The Co-operative Bank Unsecured Personal Loan
6.99% - 17.75%
$3,000 - $50,000
6 months - 5 years
$155
Requirements: NZ citizen/permanent resident or have a valid work visa.
Floating-rate, unsecured personal loans from $3,000.
Lending Crowd Secured Car Loan
6.45% - 17.23%
$5,050 - $200,000
3 or 5 years
$350 - $650
Requirements: NZ citizen/permanent resident, have a good credit score.
100% online with no paperwork or early repayment fees.
Nectar Unsecured Car Loan
8.95% - 29.95%
$1,000 - $30,000
6 months - 4 years
$240
Requirements: NZ citizen/permanent resident or have a work visa, income of $400/week (after tax), stable credit history.
Payouts made within one day of approval. Applications 100% online.
CarFinance2U Car Loan
8.95% - 23.95%
$5,000 - No max.
1 - 5 years
N/A
Requirements: NZ citizen/permanent resident.
Get pre-approved for your next car in 30 minutes.
Stadium Finance Secured Vehicle Loan
8.95% - 19.95%
$3,000 - $100,000
Up to 60 months
Varies
Requirements: NZ citizen/permanent resident, have a disposable income of $300/week.
Secured loans from $3,000 and funds paid within one day of approval.
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Compare up to 4 providers

What you should know about the advertised low-interest rate on car loans

Just because you see a low-interest rate advertised for a car loan with one particular lender, don’t automatically think that’s how much you’ll end up paying.

Those ultra-cheap interest rates may only be available to you if you have good credit or buy a particular type of car. In some cases, those rates may only apply to loan amounts over $30,000 or have other specific criteria that you need to meet.

If you’re buying a car that is two years old and you only want to borrow $21,000, you may pay a slightly higher interest rate than the one you saw advertised. In situations like this, it’s essential to find out whether your car loan has a balloon payment option, as this may help keep your repayments down.

Five ways to get the lowest rate car loan

  1. Be in stable employment.Low Interest Rate Car Loan Graph Changing employers regularly shows a level of instability to your bank. By comparison, if you’ve held down the same job for several years or only changed employment irregularly, the bank is more likely to view you as a financially stable customer.
  2. Have a good credit history. When you apply for finance through a lender, they list your enquiry on your credit report. Your credit report won’t show any adverse listings as long as you keep up with your repayments. You’re far more likely to get a good deal and a cheaper car loan with a good credit history.
  3. Offer a deposit. There are many lenders out there willing to lend you the entire purchase price of your car, plus fees. However, if you can provide a cash deposit or have a vehicle to trade-in, you create equity in your asset, which means you borrow a smaller amount of money and reduce your repayments.
  4. Shop around. You should never accept the first low-interest car loan offer you see. Always take the time to look around and compare what else is available. Be prepared to ask questions about loan terms and whether the rate is fixed or variable. You’ll be surprised at some of the great deals available on low rate car loans when you do your research.
  5. Negotiate. Regardless of which lender you approach for your low rate car loan, you can negotiate a discount on your interest rate and ask if they can waive the fees. If you’ve already done some comparison shopping and you know what other lenders are offering, you can use this information as ammunition to strengthen your negotiations. If a lender is genuinely keen to win your business, they’ll negotiate a cheaper car loan with you.

How to find the right low-interest rate car loan for you

There are a variety of factors to take into account when looking for the right low-interest car loan:

  • How old is the car you want to buy? The age of the vehicle determines the type of low-interest loan for which you’re eligible. Some lenders only lend to borrowers if you’re buying a new car, typically a car under two years old. Used vehicles may be up to seven or ten years old (older with some lenders). You may need to get an unsecured personal loan to buy a car over the specified age.
  • What are the interest rate and loan term? From there, you can compare the interest rates available to ensure you don’t end up paying more than you should. First, consider the upfront and ongoing fees, as these add to the cost of your low-interest rate car loan. Always take the time to input the numbers into a good car loan calculator. Next, check out your monthly repayments over a three-year and five-year term. Some lenders also offer seven-year terms so that you can consider this too.
  • How much will you pay? Of course, your payments each month are cheaper if you choose a longer loan term. However, you should also be aware that you’ll end up paying far more in interest over this term than if you repay your loan faster. So work on a term that best suits your budget and the amount you can comfortably afford to repay each month.
  • Is there a balloon payment? Some lenders may also offer you the option of a residual payment at the end of the loan term, which is also called a balloon payment. These types of low rate car loans can reduce your ongoing repayments, but bear in mind that the balloon repayments may be upwards of $5,000.

Five top ways to get the lowest rate car loan

  1. Be in stable employment. Regularly changing employer demonstrates a level of instability to your bank. By comparison, if you’ve held down the same job for several years or only changed employment irregularly, the bank is more likely to view you as financially stable.
  2. Have a good credit history. When you apply for finance through a lender, they list your enquiry on your credit report. Your credit report won’t show any adverse listings if you keep up with your repayments. You’re far more likely to get a good deal and a cheaper car loan with a good credit history.
  3. Offer a deposit. There are plenty of lenders out there willing to lend you the entire purchase price of a car, plus fees. However, if you can provide a deposit from your savings or in the form of a trade-in, you create equity in your asset, which means you borrow a smaller amount of money and therefore reduce your repayments.
  4. Shop around. You should never accept the first low-interest car loan offer you see. Always take the time to look around and compare all your car loan options before you apply. Be prepared to ask questions about the loan term, too. You’ll be surprised at some of the great deals available on low rate car loans when you do your research.
  5. Negotiate. Regardless of which lender you approach for your low rate loan, you can negotiate a discount on your interest rate and ask if the lender will waive the fees. If you’ve already done some comparison shopping and know what other lenders are offering, you can use this information as ammunition to strengthen negotiations. If a lender is genuinely keen to win your business, they’ll discuss a cheaper car loan with you. If the broker or finance officer doesn’t decrease them, shop around for a better deal.

The fees and other costs with a low-rate car loan

Low-interest car loans come with a few costs, but each loan may differ depending on the provider. Here is a breakdown of some fees to watch out for:

  • The establishment fee. This fee is the cost to set up your low-rate car loan. Lenders may add the establishment fee onto your loan amount, and you pay it off with the principal.
  • Any early exit or early repayment charges. If you repay your loan early, the provider may charge you this penalty to cover the loss of interest.
  • Any additional repayment fees. If you make extra repayments, the lender may charge you costs.
  • Late payment costs. The loan provider will charge you for late and missed payments. Ensure you make your payments on time to avoid this.
  • Add-on insurance: Be aware that loan providers might urge to take out other insurance, for example, mechanical breakdown insurance or guaranteed asset protection insurance. They are not compulsory insurances, so think carefully before agreeing to sign up, as they will make it more costly overall.
  • Other monthly fees. These are ongoing costs for the maintenance of your account.

For what type of vehicles are low-rate car loans ideal?

Lenders don’t view all vehicles the same way. As the lender needs to recoup its losses by selling the car if you default on a loan, newer cars are preferred. As a result, new car loans tend to attract lower rates than used car loans.

“New cars” are usually defined as vehicles under two years of age. You can also find lenders that will finance used cars, but the car will need to be under ten years old (for most lenders) or will need to be under a certain age at the end of the loan term.

Five vs seven-year loan term

Let’s assume you want to borrow $20,000. Over a five-year term, the lender might quote you an 8% p.a. interest rate, but it offers a 7.5% p.a. rate if you accept a seven-year loan term.

Low-interest loan detailsLoan option 1Loan option 2
Loan amount$20,000$20,000
Loan termFive yearsSeven years
Interest rate8%7.5%
Monthly repayment$405.53$306.77
Total interest paid$4,331.80$5,768.68

In this example, you pay 8% p.a. on the five-year loan term, so your repayments are $405.53 per month. You end up paying $4,331.80 in interest charges over five years.

By comparison, if you take the cheaper interest rate at 7.5% over a longer seven-year loan term, your repayments are almost $100 per month less at $306.77, which can be an appealing option as it’s more budget-friendly. But, unfortunately, even with the cheaper interest rate, you pay more than $1,436 in additional interest charges.

One option is to make extra repayments to pay off your low-interest rate car loan sooner while also taking advantage of the cheaper interest rate. However, first, you must check if the lender charges an early repayment fee that may wipe out any savings you thought you were making.

What factors influence interest rates?

Buying a brand new car might get you a lower interest rate, but if you don’t want a new one or your budget is more suited to a vehicle that’s already a couple of years old, you need to look for other things that can influence the interest rate you pay.

Whether the low rate car loan is secured or unsecured

A secured car loan may come at a cheaper interest rate than an unsecured loan, which is because the bank can use your car as a guarantee for a secured loan if you default.

The loan term

Some lenders offer lower rates for longer loan terms. For example, if you agree to extend your loan term to seven years instead of five, you could find your interest rate drops a little.

Don’t automatically assume that a lower rate means a cheaper car loan. It’s essential to work out your total cost over the entire loan to be sure you’re receiving the best car loan deal.

Whether the loan is full-doc or low-doc

Your loan application demonstrates that you have stable employment history, and you can provide payslips to verify your income. In that case, you’re likely to qualify for a low-interest rate car loan. However, if you’re self-employed and can’t prove your income with payslips or tax returns, you’ll likely pay a slightly higher rate with a low-doc loan.

Your credit history

If you see a low-interest rate car loan advertised but have a bad credit history, you will likely not qualify for those rates. Therefore, your cheap car loan search is usually limited to lenders that offer bad credit products.

If you are charged brokerage fees

If you’re getting your low-interest car loan through a broker or the finance officer at the car dealership, you might also expect to pay brokerage fees on top of other finance costs. With some finance, this can be as much as 4% of the amount you borrow.

If the loan comes with additional features

Some lenders include extras on top of your loan repayment, which might consist of loan insurance premium payments, where you pay for a policy that covers you if you can’t keep up with repayments. These features can increase your pay each month but don’t go towards your car loan balance.

Always check the fees charged on your loan, and wherever possible, ask for the provider to reduce them. If the broker or finance officer doesn’t lower them, shop around elsewhere for a better deal. When considering low-interest car loans, remember to compare car loan options before you apply.

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