How Much Can I Borrow with a Car Loan?

Cars are expensive, and one of the best ways to afford a new (or used) car is to take out a car loan. This helps you spread the expense over several months or years, avoiding a hefty one-off payment.

As of March 2021, around 14% of Australians currently have a car loan, and around 19% of them have done this at some point in their lives. But how much can you borrow with a car loan? The answer depends on a number of factors and your personal financial situation, but there are some good rules of thumb to follow.

In this article, we’ll look at car loans in some more detail and dive into how much you’ll be able to borrow.


How Do Car Loans Work?

A car loan works in much the same way as any other loan — you put down a deposit, agree on terms, and pay back a set amount each month, with interest. There are two main types of car loans to be aware of:

  • Secured car loans — this is where your loan is secured against the car itself. In other words, if you fail to keep up with repayments, you will lose your car.
  • Unsecured car loans — this is more similar to a traditional personal loan, where the loan is not secured against the car. However, with these loans, the interest rate is usually higher.


How Much Can I Borrow?

The amount you can borrow for a car loan depends on a number of factors. Most banks, typically, offer secured car loans for between $10,000 and $100,000, so the range is fairly large.

Here are some of the factors that will affect the amount you can borrow:

  • Your current income. You’ll be asked to show proof of your income, for example in the form of payslips or bank statements, to reassure the lender that you have the ability to pay off your loan.
  • Your credit history. If you have a strong credit history, lenders will be more willing to give you a loan and you’ll be able to borrow more than if your credit history was weak or non-existent.
  • Interest rate
  • The term of the loan. You may be able to borrow more if you agree to a longer repayment period.
  • Deposit size. How much money do you have saved? If you can make a large deposit payment for your loan, this may make it easier to borrow a larger overall amount. If nothing else, it will put you much closer to your goal and reduce the amount you will have to repay.
  • Savings. If you have a large amount of money saved, proving your ability to make loan repayments even when times are hard, this will go a long way to persuading the lender that you’ll be a responsible borrower and could positively affect the amount you’re able to borrow.
  • Living expenses. Even if your income is high, it doesn’t mean anything if your living expenses are also high. Your lender is concerned about how much money you have available for paying towards the loan. For this reason, your monthly outgoings are just as important as your income.
  • Other debts. Do you have existing debts? This will affect the amount you’re able to borrow as it will represent additional expenses that your car loan is effectively competing with. Of course, if you have paid off previous debts in full and on time, that will positively affect your credit score.


Some Things To Be Aware Of

  • Remember additional costs. Simply paying for your car is just the first step, and just the first expense. Owning and running a vehicle comes with numerous extra costs such as fuel, maintenance, insurance, and more. If you fail to factor these costs in when buying a car, you’ll be hit with some nasty financial surprises that could impact your ability to repay your loan.
  • Consider fixed vs variable interest rates. Fixed interest rates stay the same throughout the lifetime of your loan, whereas variable interest rates change over time according to the market. Fixed rates are typically higher but come with added security and predictability, making it easier to plan your finances. Variable rates may be lower, but you’re taking something of a gamble and they could increase at a future time and cause financial pressure.


Car loans are an excellent way to afford a new vehicle, and if you are careful and diligent they’re perfectly safe and can fit within your existing budget. It’s important to do your research beforehand, anticipate any unexpected costs, work with a trusted lender or broker, and make sure you have all the necessary information at hand.


At Lynam Home Loans, we’ve been helping people get car loans (and many other types of loans) for years. We work with some of the best lenders in the country to secure you the best possible agreement and help you through the entire process. To find out more, get in touch.

Barry Lynam Mortgage Broker

Barry Lynam