New vs Used Car Loans: What Changes
How car loans differ for new, demo and used cars: rates, age limits, balloons, private sales and the checks to do before you buy.
The short answer
Lenders usually offer their lowest rates on new and demo cars, and charge a little more as the car gets older. Older cars can also face limits on the loan term and balloon, and some lenders will not finance a car past a certain age at all.
That does not make a new car the cheaper choice overall. A used car often costs much less to buy, so a slightly higher rate on a smaller loan can still mean lower repayments and less interest in total.
Why the car's age matters to a lender
A secured car loan is backed by the car. The newer the car, the more predictable its value and the lower the lender's risk if something goes wrong. So lenders often set pricing in age bands, for example new or demo, a few years old, and older.
Common rules you may come across:
- A maximum age for the car at the start of the loan.
- A maximum age at the end of the loan, which can shorten the term you are offered on an older car.
- A smaller balloon, or no balloon, as the car gets older.
- Extra checks, such as an inspection report, for some older or privately sold cars.
These rules vary a lot between lenders. Some specialise in older vehicles and have no age limit at all, which is one reason comparing several lenders is worthwhile.
Buying from a dealer
Buying from a dealer is the simplest path for most lenders. The dealer provides an invoice, the lender pays the dealer directly, and the dealer handles the paperwork for the transfer.
Dealers often offer finance too. It can be convenient, but it is worth comparing it with other options before you sign. Having finance arranged before you negotiate also lets you focus on the price of the car.
Buying privately
Many lenders finance private sales, but they ask for more paperwork because there is no dealer standing behind the sale. Expect to provide:
- The seller's details and ID, and proof they own the car (registration papers in their name).
- The seller's bank details, so the lender can pay them directly.
- Sometimes an independent inspection or roadworthy report, depending on the lender and the car.
Some lenders charge a small private sale fee. If the seller still owes money on the car, the lender usually pays out the seller's loan as part of settlement, so the car comes to you clear.
Checks to do before you buy any used car
Whichever way you buy, a few checks protect you:
- Do a PPSR search using the car's VIN. It costs $2 on the government's PPSR website and shows whether money is owing on the car, and whether it is recorded as stolen or written off.
- Check the service history and the odometer reading against the service records.
- Get a mechanical inspection on an older car, especially a private sale.
- Make sure the price is reasonable for the make, model, age and kilometres.
Your lender will do its own security checks before settlement, but those are to protect the lender, not you.
New, demo or used: a quick comparison
- New: usually the lowest rates and the most balloon options, but the car loses value fastest in its first few years.
- Demo: often priced close to new-car rates, with a lower purchase price and some kilometres already on it.
- Used, a few years old: rates a little higher than new, with a lower price that often outweighs the rate difference.
- Older used: fewer lenders, shorter maximum terms and smaller balloons, but specialist lenders do finance them.
Our comparison tool asks whether the car is new or used and its build year, so the indicative options it shows reflect each lender's age rules.
Frequently asked questions
Are used car loan rates higher than new car loan rates?
Often, yes. Many lenders price by the age of the car, with their lowest rates for new and demo cars. The difference varies by lender and is often small for cars only a few years old.
Can I get a car loan for a private sale?
Yes, many lenders finance private sales. You will usually need the seller's ID, proof of ownership and bank details, and some lenders ask for an inspection.
How old can a car be to get finance?
It depends on the lender. Some set a maximum age at the start or end of the loan, while specialist lenders may have no age limit. Older cars usually qualify for shorter terms and smaller balloons.
How do I check if a used car has money owing on it?
Do a PPSR search with the car's VIN on the government's PPSR website. It costs $2 and shows any registered security interest, and whether the car is recorded as stolen or written off.
Sources
This guide is general information only. It does not take into account your objectives, financial situation or needs, and it is not credit, tax or legal advice. Tax and GST outcomes depend on your circumstances, so confirm them with your accountant. All finance is subject to lender approval, terms and conditions, and fees and charges apply.
Related reading
Related service: Car loans
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