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How Much Does A Car Loan Cost?

What Are My Repayments?

You’ve been considering automobile purchases, wondering how much you can afford. You know you’ll need a vehicle loan to buy the car, but you’re not sure how much money you have available. So, what should you do?

We’ll look at the many elements that influence the price of your vehicle loan and its affordability in this post, before diving into how to pick a car loan that fits your budget.


One of the most important factors when it comes to determining the affordability of your automobile loan is interest. So, with that in mind, let’s take a look at what might influence your rate.

Length of Loan: The interest rate charged on a loan is determined by the lender, so you may pay a greater or lesser fee depending on the length of your loan. The longer your loan is, the more money you’ll have to pay in interest overall.

Loan Amount: Lenders may also charge interest rates depending on the amount being borrowed. As a result, if you borrow more or less money on your automobile loan, your rate of interest might go up or down.

Credit Rating: Lenders will generally check your credit to see what interest rate you will be charged on your auto loan. You are considered less of a hazard if your credit is good, which implies you will pay a lower interest rate. If your credit is poor, you are likely to be charged a greater interest rate on the loan, even if it has some blemishes.

Secured or Unsecured: If you take out a secured car loan to protect your automobile loan, it is considered a lesser risk for lenders, so you will pay a lower interest rate. Because they are higher-risk unsecured loans, they frequently have a greater interest rate.

New or Used: The interest rate on your car loan is determined by a variety of factors, including the make and model. The type of vehicle you buy also affects your auto loan’s interest rate. The interest rate on new cars (which may be up to two years old, depending on the lender) is typically lower than that on used automobiles.


Fees also influence the price of a vehicle loan. Knowing what fees to watch for and how to get around them may help you save money on your car loan in the long run.

Fees for Applying: These are charged by the lender to establish the loan, also known as application fees or upfront costs. They may be paid upfront or in instalments, depending on your financial situation.

Monthly Fees: These are monthly payments that must be paid. Some loans may charge upfront fees but no continuing costs, while others may charge continuing fees but no upfront expenses.

Extra Payment Fees: When you make an extra payment on your loan, you will be charged additional fees. Look for a loan that doesn’t charge these costs if you think you’ll make more payments.

Fees for Early Repayment: When you pay off your loan early, you will be charged these expenses. Some lenders do not charge these costs, while others waive them if you repay your debt within the final year of the term.

Redraw Fees: Loans that provide the option of redrawing may charge a redraw fee. Try to keep redraws to a minimum, since each additional one will help you save money on interest.

Late Payments: If you are late making a payment, or if you miss a payment, you will almost certainly be charged a fee. To avoid missing payments and incurring this fee, set up an alert or automatic payment.

Car Costs

When deciding how much you can afford to borrow, don’t forget about your automobile loan obligations. You should also consider the expenses associated with keeping a car on the road.

The following are some of the expenses that you may face while driving: petrol, vehicle registration (rego), CTP, auto insurance, roadside assistance, tolls, servicing and repairs. Calculate how much you will need to set aside for these monthly expenses using the Moneysmart car’s app from the government.

Low Cost

So, now that you know what factors may influence the cost of a vehicle loan – and what expenditures you’ll need to account for on top of your loan– how do you determine how much you can really afford to borrow?

To begin, make a spending plan. Make a note of all income and expenditures (using an app makes this process much easier). Find out how much you may borrow each month with the information in this article.

Now you’ve got a target in mind, plug it into a car loan calculator to determine how much money you may borrow over various terms. Keep in mind that while the length of your loan reduces your monthly payments, the amount you pay overall will most likely be greater.

Choosing the proper loan is a balancing act, you must pick a repayment amount that is adequate to minimize interest expenses while yet big enough to stay affordable. You’ll have a sum of money that you can borrow after you’ve figured it out.

Borrowing Capacity

When you apply for a car loan, the lender will evaluate your creditworthiness to ensure that you have enough money available to repay the amount you request. This won’t be an issue as long as you did your math correctly.

When calculating your borrowing capacity, the lender will consider your earnings, assets, obligations, and a variety of other factors. When you apply for the loan, you’ll usually be expected to submit documentation of these things.

Comparing Car Loans

The interest rate and other fees you’ll pay will vary depending on the borrower’s creditworthiness, as well as numerous other factors. It’s crucial that you thoroughly examine all of your alternatives to ensure you get the best and most cost-effective vehicle loan for you.