Updated for 2026 · Car Finance Australia
Choosing between a new and used car is one of the first — and most consequential — decisions you’ll make when buying a vehicle. Both options have genuine advantages, and the right answer depends on your budget, how you plan to use the car, and what kind of loan you can access. This guide breaks down the key differences so you can make a confident, informed decision.
How car loans work
Car loans let you purchase a vehicle at the full price and drive away immediately, with repayments spread over an agreed term. The key variables are the loan amount, interest rate, loan term, and any fees charged by the lender. Whether you’re buying new or used, the structure is broadly the same — but the loan conditions, rates, and borrowing limits can differ significantly between the two.
New car loans: advantages and disadvantages
Advantages
- Lower interest rates. New vehicles are lower risk for lenders because their value is well established and they come with a manufacturer’s warranty. This typically translates to more competitive rates.
- Higher loan-to-value ratio. Lenders will often finance up to 90% or more of a new car’s purchase price, reducing the deposit you need upfront.
- Longer loan terms. New car loans commonly run between five and seven years, giving you more flexibility to manage monthly repayments within your budget.
- Latest safety and efficiency technology. New vehicles meet the most current fuel efficiency and emissions standards, and include up-to-date safety features — relevant if you’re considering an EV or hybrid in 2026.
- Manufacturer’s warranty included. Reduces the risk of unexpected repair costs during the early years of ownership.
- Wider lender choice. Because new car loans carry less risk, more lenders offer them — which means more competition and potentially better terms.
Disadvantages
- Higher purchase price. The total loan amount and therefore your total interest paid will be greater than for a comparable used vehicle.
- Depreciation. New cars lose a significant portion of their value in the first year. If you need to sell before the loan is repaid, you could owe more than the car is worth.
- Higher insurance premiums. Comprehensive insurance for a new vehicle costs more than for an older one, adding to your overall annual outlay.
Used car loans: advantages and disadvantages
Advantages
- Lower purchase price. The most significant advantage — you get more vehicle for your money, and the total loan amount is smaller.
- Lower insurance costs. Comprehensive insurance on a used vehicle is typically cheaper, reducing your ongoing annual costs.
- Slower depreciation. Used cars have already absorbed the steepest part of their depreciation curve, so the gap between the car’s value and what you owe on the loan closes more predictably.
- Flexible loan conditions. Some lenders offer more negotiable repayment terms on used vehicle loans, particularly through a specialist broker.
Disadvantages
- Higher interest rates. Used vehicles represent a higher risk to lenders due to age, condition, and uncertain value, so rates are typically higher than for new car loans.
- Lower loan-to-value ratio. Lenders often cap used car financing at around 80% of the vehicle’s value, meaning you’ll need a larger deposit.
- Lender age restrictions. Many lenders impose a maximum vehicle age at the end of the loan term — commonly 10 to 15 years. This can limit your loan term options for older vehicles.
- Potential for higher maintenance costs. Used vehicles are more likely to require unplanned repairs, which should be factored into your overall budget.
2026 note: The growing availability of certified pre-owned (CPO) programs from major manufacturers has narrowed some of the risk gap between new and used. CPO vehicles come with an extended warranty and have passed a condition inspection — lenders often treat them more favourably than standard used vehicles, which can mean better rates.
New vs used car loan: a quick comparison
| New car loan | Used car loan | |
|---|---|---|
| Typical interest rate | Lower | Higher |
| Loan-to-value ratio | Up to ~90% | Up to ~80% |
| Loan term | Up to 7 years | Shorter (age-dependent) |
| Insurance cost | Higher | Lower |
| Depreciation risk | Higher (early years) | Lower |
| Lender choice | Wider | More selective |
| Warranty | Manufacturer included | Limited or none |
Why getting pre-approved changes the process
Whether you’re buying new or used, walking into a dealership with a pre-approved finance offer puts you in a significantly stronger position. You’ll know your exact budget, you won’t be pressured into dealer finance at the point of sale, and you can negotiate on the car price rather than the monthly payment.
A pre-approval through Ezilend uses a soft credit check and won’t affect your credit score. Once you’ve found your vehicle, full approval is typically quick.
Frequently asked questions: new vs used car loans
Is it harder to get a loan for a used car than a new one?
Not necessarily harder, but the conditions are different. Lenders apply more scrutiny to used vehicles — particularly older ones — because the asset is harder to value and carries more risk. Some lenders restrict loans on vehicles over a certain age or past a set kilometre threshold. A broker can identify which lenders are most flexible for the specific vehicle you’re considering.
What is the maximum age of a used car I can finance?
Most lenders set a maximum vehicle age at the end of the loan term — commonly between 10 and 15 years, though some specialist lenders go higher. For example, if you’re buying a car that is already eight years old and want a five-year loan, it would be 13 years old at the end of the term — which some lenders will decline. Speak to a broker to find lenders suited to older vehicles.
Do I need a deposit for a car loan?
Not always. For new cars, some lenders will finance up to the full purchase price. For used cars, a deposit is more commonly required because lenders cap the loan at around 80% of the vehicle’s assessed value. A larger deposit also reduces your loan amount and total interest paid, and can improve the rate you’re offered.
Should I buy new or used if I’m on a tight budget?
A used car typically has a lower purchase price and lower insurance costs, which can make it more affordable overall despite the slightly higher interest rate. However, factor in the potential for higher maintenance and repair costs on an older vehicle. Running the numbers on total cost of ownership — not just the loan repayment — gives you a more accurate comparison. Ezilend’s car loan calculator can help you model different scenarios.
Can I finance a private sale (not a dealership)?
Yes, though the process differs slightly. Lenders financing a private sale typically require a vehicle inspection or PPSR check to confirm the car is free of encumbrances. Some lenders restrict finance to dealer sales only, so it’s worth confirming this upfront. A broker can identify lenders who readily support private sale finance.
What is a certified pre-owned vehicle and does it affect my loan?
Certified pre-owned (CPO) vehicles have been inspected and reconditioned by the manufacturer or an authorised dealer, and typically come with an extended warranty. Because the risk profile is closer to a new vehicle, some lenders treat CPO vehicles more favourably — potentially offering better rates or higher loan-to-value ratios than for a standard used car.
Are electric vehicles (EVs) financed differently in Australia?
EV finance follows the same general structure as any car loan, but there are some considerations specific to 2026. Some lenders offer preferential rates on EVs as part of green finance initiatives. Residual values on used EVs can be less predictable, which some lenders factor into their used EV loan terms. If you’re considering a novated lease, EVs under the relevant FBT exemption threshold may offer significant tax savings — worth discussing with your employer or a financial adviser.
Talk to Ezilend today
Ezilend has been helping Australians find the right car finance for more than 25 years. Whether you’re buying new or used, we work across a wide network of lenders to find the most competitive rates and terms for your circumstances.
Use our car loan calculator to estimate your repayments, apply for pre-approval, or contact us to speak with our team. We make the loan process simple, personal, and focused on getting you the best deal possible.
