Securing the lowest car loan rates can make a huge difference to your budget. In 2025, with the car finance market evolving and interest rates higher than a few years ago, it's more important than ever to be savvy about car financing. Whether you're purchasing a new vehicle, looking for the best car loan for a used car, or even refinancing an existing loan, the strategies below will help you save money and get a great deal on your car loan. The key is to plan ahead, compare car loans, and put yourself in the best position to negotiate a low interest rate.
Check and Improve Your Credit Score
Your credit score is one of the most important factors that lenders consider when determining your car loan interest rate. In short, a higher score means you’re seen as a lower-risk borrower, which can earn you a lower interest rate. Start by checking your credit score and credit report (you can obtain a free copy from Australia’s credit bureaus). If you notice any errors or old defaults, get them corrected to potentially give your score a boost.
If your score isn’t in the good or excellent range, take steps to improve it before applying for a loan. Here are some quick credit-improvement tips:
Pay all bills on time: Consistent, timely payments on credit cards, utilities, and other loans will steadily improve your credit history.
Reduce existing debts: Paying down outstanding credit card balances or personal loans lowers your debt-to-income ratio and shows lenders you manage debt well.
Avoid multiple credit applications: Don’t apply for other loans or cards in the lead-up to your car loan. Too many credit inquiries in a short time can drag down your score.
Keep old accounts open: If you have older credit cards with good repayment history, keeping them open (with low or no balance) can lengthen your credit history and help your score.
By polishing your credit profile, you’ll not only increase your chances of approval but also qualify for much more attractive interest rates. Many lenders reserve their lowest car loan rates for borrowers with strong credit. If your score is currently below the mid-600s (on a typical 0–1000 scale), you might consider waiting a few months to improve it before taking on a car loan. A bit of patience and effort here can potentially save you thousands in interest over the life of the loan.
Save for a Deposit or Use a Trade-In
Another practical way to secure a low interest rate is by contributing a healthy deposit on the car or trading in your existing vehicle. The more money you put down upfront, the less you need to borrow – and that means less risk for the lender. A lender is likely to offer a better rate on a $20,000 loan than on a $30,000 loan for the same car, because a larger deposit signals financial responsibility and gives the lender a bigger buffer if something goes wrong. It also reduces the loan-to-value ratio (LVR), which lenders consider when pricing a loan.
If you have a car already, using it as a trade-in can count toward your deposit. For example, if the dealer gives you $5,000 for your old car, that’s $5,000 less you have to finance on the new one. Combined with some savings you’ve set aside, this can significantly shrink the loan principal. For both new and used car buyers, aiming for at least a 10-20% deposit is a good rule of thumb for getting more favorable loan terms.
In addition to lowering your interest rate, a decent deposit or trade-in will also keep your monthly repayments lower and reduce the total interest you pay. It helps you avoid going “upside-down” on your car loan (owing more than the car is worth). If possible, also pay for upfront costs like stamp duty, registration, and insurance out of pocket instead of financing them. By borrowing only what you really need for the car itself, you’ll make your loan more manageable and attractive to lenders.
Get Pre-Approved for Finance
Walking into a dealership with a pre-approved car loan in your pocket can be a game-changer. Pre-approval means a bank or lender has already assessed your financial situation and agreed in principle to lend you up to a certain amount at a given interest rate (pending final paperwork and car details). Essentially, it’s like having your financing ready before you start shopping for the car. This not only gives you confidence about your budget, but also strengthens your negotiating position with car sellers.
By getting pre-approval, you accomplish a few things that can help you snag the lowest rate possible:
You know your interest rate ceiling: The broker will indicate the interest rate or range you qualify for. If it’s a decent rate, you can negotiate at the dealership knowing they’ll have to beat that to tempt you with their financing. If it’s higher than you hoped, you can decide to improve your financials more or shop around for another lender, all before committing to a car purchase.
You shop like a cash buyer: With a pre-approved loan, you effectively have the money ready, so you can focus on negotiating the best price for the car itself, rather than juggling financing talk. Dealers often take buyers more seriously if they know the financing is secured elsewhere, and you won’t be as easily steered into expensive financing add-ons.
Faster, smoother purchase: Once you find the right car, the sale process is quicker since much of the loan paperwork is already done. You’re less likely to make rushed financing decisions on the spot because you’ve already sorted it out.
To get pre-approved, approach Finwave before you go car shopping. You’ll need to submit an application with proof of income, identification, and possibly a credit check. We will then let you know how much you can borrow and at what rate. Pre-approvals usually last for a set period (e.g. 1-3 months), and you’re not obligated to use it if you find a better deal or decide not to buy a car. It’s a free, no-risk step – and it can save you from overpaying on interest.
Prepare a Strong Loan Application
Even with a great credit score and a hefty deposit, you can further increase your chances of snagging the lowest interest rate by submitting a strong loan application. Lenders will assess not just your credit, but your overall financial position and reliability. Essentially, you want to present yourself as an ideal borrower. Here are key factors lenders consider (and how you can address them):
Stable income: Lenders will look at your income level and stability. You’ll typically need to provide recent payslips or tax returns. Having a steady full-time job (or a long-term stable contracting history) will make them confident that you can meet the repayments. If you’ve just started a new job, it might help to wait until any probation period is finished, if possible, so you’re seen as more secure.
Employment history: How long have you been with your current employer? If you’ve been hopping between jobs every few months, that could be a red flag. Consistency is a plus. Of course, changing jobs for career growth is normal, but be ready to explain your situation if asked.
Other debts and expenses: When you apply, the lender will evaluate your existing debt obligations – this includes credit card limits, personal loans, home loans, etc. They want to ensure you’re not overcommitted. A good tip is to reduce your obligations before applying: for example, pay off a small personal loan or reduce an unused credit card limit. This improves your debt-to-income ratio. Lenders have to lend responsibly, so if your plate is too full, they either won’t approve the loan or they’ll give you a higher rate to compensate for perceived risk.
Living expenses: Nowadays, banks also consider your reported living expenses (like rent, groceries, bills, etc.) to gauge how much free cash flow you have for a new loan. Be realistic and accurate in reporting your expenses on the application. If you can trim some discretionary spending and show more surplus income each month, even better.
Asset position: While not as crucial as income and credit, some lenders take comfort if you have other assets or savings. If you’ve got some money in the bank after paying the car deposit, or you own other assets, it shows financial buffer. You don’t need to be wealthy, but highlighting a bit of a safety net (even a few thousand in an emergency fund) can make a difference.
The vehicle itself: If it’s a used car loan, the age and condition of the car will matter. Most lenders prefer the car to be relatively new (often under 7-10 years old by the end of the loan term). A newer car is better collateral, and you might get a lower rate on a 3-year-old car than on a 12-year-old one. So, choose your vehicle wisely. If you’re eyeing an older used car, be aware you might have to go with a slightly higher-rate loan or a shorter term. Alternatively, for a brand new car, you might qualify for special new car rates that some lenders offer (sometimes a few points lower than used car rates).
To tie all this together, accuracy and honesty on your application are vital. Be ready to supply all requested documents promptly – this shows you’re organised. Write neat and clear applications (if online, double-check entries) to avoid errors that could slow down the process. If a lender can quickly verify everything about you and sees a stable, reliable profile, they’ll be more inclined to approve you at a competitive rate. Essentially, you want to leave them with very little doubt that lending to you is a safe bet.
Consider Refinancing Your Car Loan
Perhaps you already have a car loan – you took it out a year or two ago when your circumstances were different or rates were higher. You’re not stuck with that rate forever. Refinancing a car loan means taking out a new loan (with a new lender or even the same lender) to pay off your existing car loan, ideally at a lower interest rate or better terms. It’s a strategy worth considering, especially if interest rates have fallen or your financial situation has improved since you first financed your car.
How to refinance a car loan: The process is quite straightforward. You basically go through many of the same steps as getting an original loan:
Check your current loan details: Find out your current payoff amount, interest rate, and any exit fees. Some car loans might charge a small early termination fee or break cost (particularly if it was a fixed rate). Knowing these costs will help you calculate if refinancing is worthwhile.
Compare refinancing offers: Approach Finwave and see what car loan rate you could qualify for now. Use the tips above: check your credit, improve it if possible.. Even a 1% reduction in your interest rate can make a big difference on your monthly payment and total interest over the remaining term. In 2025, for example, if you originally took a loan when rates were higher, there’s a chance you can now find a better deal as competition between lenders heats up.
Apply and get approved: Once you find a good offer (lower rate, suitable term), apply for the new loan. You’ll need to meet the lender’s criteria just like any new loan. If your credit score or income is stronger now than before, you might be pleasantly surprised at the rate on offer.
Payout and transfer: Upon approval, the new lender will typically pay out the funds to settle your old loan directly. Then you start making payments to the new lender at the new lower rate. Ensure the transition is coordinated so that the old loan is closed (you don’t want to accidentally miss a payment in between – usually timing is arranged at settlement).
Refinancing can be a smart move for anyone considering how to get a lower interest rate on an existing car loan. It never hurts to check the current market. If you discover that you can knock your rate down from, say, 8% to 6%, that’s a win. Just be sure to factor in all aspects of the switch. In many cases, refinancing is relatively quick and can be handled by Finwave in a few days. It’s about keeping your finances optimised – much like people refinance home loans to save on interest, you can do the same for your car loan and keep more money in your pocket.
Conclusion: Drive Away with the Best Deal
Getting the lowest interest rate on a car loan in Australia comes down to being informed, prepared, and proactive. By checking your credit and strengthening it, putting some money down, choosing a sensible loan term, and having Finwave compare your options thoroughly, you’ll set yourself up for success. Remember to be cautious of convenient but costly offers, like dealership finance that isn’t as sweet as it sounds, and always understand the loan conditions, whether it's fixed vs variable or any fees involved. With the right approach, you can save yourself a substantial sum of money and enjoy your new (or used) car with less financial stress.
Ultimately, a car loan should work for you, not against you. Use the tips above whether you’re buying your first family car, upgrading to a bigger vehicle, or refinancing your current loan for a better rate. With a bit of effort, you can drive away knowing you secured the best deal on your finance.
Contact Finwave to discuss your options.
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