How to Choose the Right Car Loan for Your Budget
Buying a car is a big decision - and so is choosing the right way to pay for it. While it's easy to focus on the make, model, or colour of your new ride, the car loan behind it can make or break your budget. At AFS, we've been helping Australians find the right finance for over 30 years, and we know how important it is to get it right the first time.
Here's what you should consider to make sure your car loan works for you, not the other way around.
Start with Your Budget
Before you even think about loan types or repayments, take a good look at your budget. Be honest about your income, regular expenses, and how much you can comfortably commit to car repayments each month.
Don’t forget the hidden costs of car ownership—like insurance, fuel, servicing, and registration. These can add up quickly, and being unprepared can lead to financial stress. A good benchmark? Try to keep total car-related expenses within 15–20% of your monthly income.
Use our handy Loan Calculator to test different loan amounts and terms to see what fits your budget.
Understand Loan Types: Secured vs. Unsecured
A secured car loan uses the vehicle as collateral. If you default, the lender can reclaim the asset—which means lower interest rates and more favourable terms. These are ideal for most vehicle purchases.
An unsecured loan doesn’t require any collateral but generally comes with a higher interest rate due to increased risk. It’s a good option if you’re buying a vehicle the lender won’t secure or need more flexibility.
At AFS, we offer both secured and unsecured loans to give you the choice that suits your circumstances.
Compare Interest Rates (They Matter More Than You Think)
A small difference in interest rates can mean thousands saved—or lost—over the life of your loan. Always compare your options before signing on the dotted line.
AFS offers competitive rates with flexible terms, and you can use our calculator to see exactly what your repayments would look like at different interest levels.
Choose the Right Loan Term
Shorter loan terms = higher monthly repayments but less interest overall. Longer terms = lower repayments but more total interest paid. Finding the balance between what’s affordable each month and what makes sense long-term is key.
AFS lets you choose the loan term that best fits your lifestyle—with the flexibility to adjust your strategy if things change down the track.
Balloon Payments: Great for Cash Flow, But Plan Ahead
A balloon payment is a larger lump sum you pay at the end of your loan. It can make your monthly repayments lower, which is helpful for managing cash flow—but you need a solid plan for paying it when it’s due.
We’ll walk you through all your options, including balloon payment loans, to ensure you understand how they work and whether they’re right for you.
Watch Out for Fees and Extra Charges
Application fees, early exit fees, account-keeping charges—they all add up. Sometimes, a slightly higher interest rate with fewer fees could actually be the better deal.
At AFS, we prioritise transparency. That means no hidden surprises—just clear, upfront information to help you make informed decisions.
Consider Getting Pre-Approved
Getting pre-approved for your car loan helps you set a firm budget before you walk into a dealership or start browsing online. It gives you bargaining power, streamlines the process, and protects you from overcommitting.
With AFS pre-approval, you’ll know exactly what you can borrow—and at what rate—before you sign anything.
Final Thoughts
A car loan isn’t just a financial product—it’s a long-term commitment. Choosing the right one means understanding how much you can afford, what types of loans are available, and how interest rates and fees can affect the total cost. Don’t rush it.
At AFS, we take the time to help you find the right solution. Whether you’re buying your first car or upgrading to something new, we’ll work with you to ensure your loan fits your goals, not just your repayments.
Talk to AFS today to get started with a car loan that puts your budget first.