Australia Auto Loan

Frequently asked questions

Novated lease vs auto loan?

A novated lease bundles the vehicle cost and running expenses through salary sacrifice, reducing your taxable income. Electric vehicles eligible for the FBT exemption introduced in 2022 make novated leases especially attractive. A standard auto loan gives you outright ownership from day one and carries no FBT considerations. Compare the after-tax cost of each option using your marginal tax rate before deciding.

Is car loan interest tax deductible in Australia?

Interest on a car loan is only deductible to the extent the vehicle is used for income-producing purposes, such as a sole trader using the car for work. Private use of the vehicle is not deductible. If you use the car partly for work, you can apportion the interest using your logbook percentage or the ATO cents-per-kilometre method. Employees generally cannot claim car loan interest as a deduction.

What APR should I expect on an Australian car loan in 2025-2026?

Secured new-car loan rates from banks and credit unions typically range from around 6 percent to 12 percent per annum depending on the lender, your credit score, and the loan term. Dealer finance can be higher, sometimes above 14 percent, so compare comparison rates rather than headline rates. The comparison rate includes fees and is a more accurate measure of the true annual cost. Pre-approval from your bank before visiting a dealer gives you a benchmark to negotiate against.

Does a larger deposit meaningfully reduce the total interest paid?

Yes. Every dollar of deposit reduces the amount financed, which reduces the base on which interest compounds each month. On a $35,000 loan at 8 percent over five years, increasing the deposit by $5,000 saves roughly $1,085 in total interest. A larger deposit can also qualify you for a lower interest rate because the lender takes on less risk. Paying down the loan early or making fortnightly rather than monthly repayments produces a similar compounding benefit.