A car you need versus a debt you can carry
Before looking at any lender, work out what a car would cost to run each fortnight, not only to buy. Registration, insurance, fuel and servicing all come from the same budget as rent and food.
If your only income is a government payment, even a modest repayment can take a large share of it. A cheaper car, or a smaller loan, often protects you better than stretching for something newer.
A useful test is to write down the total weekly cost of owning the car and then subtract it from your income. If very little remains for emergencies, the loan is too big, however friendly the salesperson is.
How lenders treat Centrelink payments
Lenders set their own rules. Some count certain government payments as income, while others require a job, even part-time or casual, as your primary income. Bank policies on this are not uniform, and you should not assume that one refusal applies everywhere.
Each application can be recorded on your credit file, so ask a lender about its policy before you apply rather than applying to many at once.
- Recent bank statements and payment statements
- Proof of identity and address
- A written budget showing your regular costs
- Details of other debts, including buy now pay later
Secured loans and what repossession means
Moneysmart explains that with a secured car loan the lender can repossess and sell the car if you fall behind. Unsecured loans do not put the car at risk but usually carry higher interest rates.
Think about this before signing. If the car is how you get to work, losing it could set back your job search and still leave you owing money after a sale.
Customer-owned banks and credit unions
Mutual banks and credit unions are owned by their members, and several publish clear car loan terms. Beyond Bank, for instance, lists a fixed-rate loan with set fees, allows extra repayments and early payout without a penalty, and requires borrowers to meet its lending criteria.
Rates and conditions change, so check the current terms. A published rate is usually for applicants with a strong profile, and your own offer may differ.
No-interest loans for repairs and some vehicles
The Salvation Army is one of the community organisations delivering the No Interest Loan Scheme. It lists car repairs among items that can be financed, up to $2,000, with no interest and repayments of up to 24 months. It does not cover used cars, so check what applies to your purchase.
You need to meet an income or concession card test and show you can afford repayments. The money is paid directly to the supplier.
Reading the costs before you sign
Moneysmart advises shopping around for finance before you pick a car, since a dealer's offer may not be the cheapest. Watch for establishment fees, broker or dealership fees, monthly charges and default fees.
The comparison rate rolls interest and fees into one number, but only compares fairly when loan amount and term are the same. Balloon payments reduce repayments now, yet leave a large amount to find later.
Warning signs and where to turn if it goes wrong
Be cautious with anyone who asks for an upfront fee before approving a loan, promises approval regardless of your history, or pushes you to sign the same day. A legitimate lender will give you documents and time to read them.
If you fall behind, contact the lender early and ask about hardship arrangements. A free financial counsellor, reachable through the National Debt Helpline on 1800 007 007, can help you negotiate.
A step-by-step approach
Start by fixing a ceiling for the purchase price, based on what you can repay each fortnight without borrowing again. Then get finance quotes before you visit a dealer, so you know what a fair offer looks like.
Next, check the car itself: a roadworthy inspection, the registration status and whether money is still owing on it. Only then compare final offers on the total repaid, and keep your documents in one place.
If a lender asks you to sign before you have seen the full contract, stop. You are entitled to time to read it and to ask questions about every fee.
Frequently asked questions
Can I get a car loan on JobSeeker Payment alone?
It depends on the lender. Some accept certain government payments as income, while others expect a job as your main income. Ask about the policy first, and consider a smaller loan or a cheaper car.
What is the safest type of car loan?
No loan is risk free. Fixed rates give predictable repayments, and loans with no penalty for early repayment give flexibility. Whatever you choose, check that repayments fit your budget even if your income changes.
Can a no-interest loan buy a car?
Standard no interest loans of up to $2,000 are for essentials such as repairs. Separate vehicle loans exist through some providers, with different limits and credit checks. Check eligibility with an accredited provider.
What if I cannot keep up repayments?
Speak to the lender straight away and ask for hardship assistance. You can also call a financial counsellor for free. Ignoring the problem can lead to default fees, repossession of a secured car and damage to your credit file.
Useful organisations and links
- Beyond Bank Australia – Car loansCustomer-owned bank with a fixed-rate car loan, published fees and no penalty for early repayment.
- Moneysmart – Car loansGovernment guide to secured loans, fees, comparison rates and balloon payments.
Links to third-party organisations with no commercial tie to this site. Always check the conditions with them directly.