Financing a car in the US compared to Australia

April 16, 2014

After a house, a car is probably the biggest single purchase you will ever make in your life.  Once you’ve had a go on a smaller car, scraped it, outgrown it, or just want to upgrade it, you may find that you need to take out a loan to secure the car of your dreams. My dream car is an Audi A6. It’s a huge step up from my ’08 Benz, but still not a bad investment.

In the US, there are banks, credit unions and even the car dealership you buy your car from that you can borrow money from to finance your car. The average interest rate people are offered is around 7%, but if you have a poor credit rating you could be charged a much higher interest rate, with some reported to be up to 20%.

However, in Australia there is more practical help available for car buyers.  For example, car loans in Perth can be sorted better through a broker, and using a broker can help you secure the best deal.  Brokers will be best placed to advise on what loans are best for you, and can help to get you approved for a loan, even if your credit history is not perfect.  Interest rates on car loans vary in Australia, with average interest rates being from around 10% if you borrow from a bank, but they can be far lower than that when borrowing from an approved credit union.

One thing to keep in mind is that making a larger down payment can result in lower interest rates being charged, as can agreeing to make a higher monthly payment – which will result in a shorter loan term.  Different rates will also be available depending on whether the car is new or used, and new cars will often be subject to better interest rates than used cars.

As with any big purchase, it is always worth seeking out professional help to ensure that you are getting the best rates and making sure that your money is going as far as it can go.