Unsure why you’re seeing car loan rates advertised at 3.85% but you can’t seem to get an offer better than 9.0%? It’s all because of something called ‘risk-based’ quoting.

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Ever since the Financial Services Royal Commission was established in 2017, the lending industry has changed the way they assess applicants and offer loans based on the perceived level of risk.

Finance lenders now look at things like whether you’re a property owner or renter, whether you’re employed full-time or part-time, and how long you’ve been working for your current employer. Applicants purchasing a new car also tend to get lower interest rates compared to those buying a used car.

What that means is that an applicant that owns property, has been in a full-time job for more than one year and is buying a new car might be offered a loan with an interest rate around 4-5%, while an applicant with a casual job that’s renting and buying a used car could be offered a loan with an interest rate between 9-11%.

Seems a little unfair, right? While it may not seem very fair, it’s important to remember that finance lenders need to make a profit on the loans they write, so it makes sense that a smaller loan with higher risk should come with a higher interest rate.

Is it beneficial to use a car finance broker?

Getting a loan isn’t always simple. If your circumstances are a little complicated (such as being self-employed or having multiple jobs), having a car finance broker on your side who can properly explain how your personal situation impacts your borrowing power can be hugely beneficial.

They have in-depth knowledge of the car finance industry, the various lenders and their lending policies, and can help you quickly assess the various loan options from a long list of lenders and do all the legwork to get your application across the line.

How important is the interest rate?

While the interest rate of your loan is important, what’s more important is the price you pay for the car. 

The loan principal (or the car purchase price) is by far the largest portion of your repayments, and the difference between a 6% and 9% interest rate is minimal over the life of the loan. Negotiating a few thousand dollars off the purchase price of the car is going to be a much bigger win than getting a couple of percent off your loan interest rate.

The following table shows you how much you can save by negotiating a lower sales compared to a lower interest rate…


Lower interest rate

Lower sales price

Interest Rate



Car Price



Establishment Fee



Loan Term

5 years

5 years


$876 pm

$838 pm





But how do you get enough bargaining power to negotiate a price reduction? 

It’s simple – get your finance pre-approval from an independent car loan broker before you head into the dealership for a test drive.

Cars can be an emotional purchase. Once you’re in the showroom and have fallen in love with ‘the one’, all logic can fly out the window and you can easily fall victim to the dealers tricks, such as bumping up the price of the car or lowering the value of your trade-in.

It’s critical that you have your car finance sorted ahead of time to protect yourself from being taken for a ride.

How to Negotiate a Lower Car Price With the Help of a Pre-Approval

Getting a pre-approval from a car loan broker not only lets you know exactly how much you can borrow, but when you tell car dealers that you already have your finance sorted, they’ll be more inclined to wiggle down on price to make the sale that day.

It’s also helpful to do your research beforehand to find out how much other dealerships and online sellers would accept for the same vehicle as you can use this information during your negotiations. For example, let the dealer know that you’ve been given a quote from one of their competitors for the price you’re willing to pay, and ask them if they’re willing to match it.

While some dealers may meet you at your asking price, some won’t. If this happens, you need to be willing to walk away from the sale. After all, if you decide you are willing to pay what they’re asking, you can always give them a call later once you’ve had more time to think it over.

Can’t you just go to a bank for car finance?

You’ve probably been with one of the big banks for a long period of time and figure it’s a good idea to source your car finance through them—but they’ll rarely offer you the best deal. 

While it might come as a surprise, the big banks aren’t that interested in car loans. They don’t make anywhere near as much profit from car loans as they do from home loans, so they won’t be very willing to negotiate to get your business.

The smarter option is to use a car finance comparison tool like www.autobuddy.com.au

Autobuddy makes it easy to compare car finance from a range of bank and non-bank lenders to help you find the best deal. You’ll be connected with an expert car loan broker in your area who will help you source quotes for the best car finance deals within 24 hours, and they’ll even take care of the legwork to complete your loan appli cation.

Take the autobuddy 30 second quiz to find out how much you could save on your car finance.

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Practical Motoring

The team of journalists at Practical Motoring bring decades of automotive and machinery industry experience. From car and motorbike journalists to mechanical expertise, we like to use tools of the trade both behind the computer and in the workshop.


  1.  Thanks for sharing this Unsure why you’re seeing 3.85 percent vehicle loan rates advertised but can’t manage to obtain a better deal than 9.0 percent? It’s all due to a practice known as “risk-based” quotation. Applicants who purchase a new car also have cheaper interest rates than those who purchase a used car.

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