Cheap Car Loan NZ

The interest rate is what we tend to consider first when weighing up a car loan. But a cheap interest rate doesn’t necessarily make for the best car loan. So how can you find the best cheap car loan?

How to find the best cheap car loan

The best car loan is the one that suits your personal needs. Not just the loan with the lowest interest rate. Car loans are packed with different fees, features, payment schedules and add-ons. Some of which can really help, or hinder, your repayments. To find the best car loan it pays to consider all of these factors:

Shop around

When searching for the best cheap car loan, the most important thing to do is shop around. While it may be convenient to arrange finance through the dealership you’re buying your car from, it’s not always the best deal.

For example, even if the interest rate you are offered is competitive, you may be liable for extra fees, for example a commission for the dealer involved.

Also, having your finance in place before you start your search for a new car will give you a budget to work to. Plus, by being able to offer the dealer cash, you’ll have more leverage when negotiating the best price.

The interest rate

The interest rate isn’t everything, but it is the biggest factor to consider with a car loan. No matter how many add-ons and special benefits you are offered, if the interest rate is well above average, it probably isn’t the best car loan for you.

So first, you should always look at the loans with the lowest interest rates. However, as long as your loan has a competitive interest rate, it doesn’t necessarily have to be the lowest on the market. Remember, the interest rate isn’t everything.

Another factor to consider is that the interest rate on your loan can be fixed or variable. If you prefer certainty over the size of your repayments, choose a fixed rate. If you feel the market could favour you, and interest rates might fall, you might want a variable rate.

Credit score

Your credit score may also impact the interest rate you are offered. Some lenders look at your credit history when determining what rate to offer you. If you have an excellent score, you may be offered a lower interest rate as you are seen as less of a risk to lend to. You can easily check your credit score for free. If yours isn’t as high as you’d like, there are steps you could take to help improve it.


Establishment fees, monthly service fees, missed payment fees, extra repayment fees and early repayment fees – the list of fees associated with a loan can become a headache. When comparing loans with similar interest rates, it pays to look into their fees, as they can vary substantially.

Additionally, some fees will be of more concern to you than others. If the loan charges no fees for additional repayments, you may want this option. On the other hand, if you don’t intend to make additional repayments, this fee won’t apply, so it shouldn’t influence your decision making.

But some fees are unavoidable and, if high, can eat into any savings a low interest rate provides.

→Related article: Top Selling Utes in New Zealand

Features and flexibility

Loans come with varying levels of features and flexibility. As mentioned above, some loans charge for the freedom of making additional repayments or paying off a loan early, while some don’t.

Typically, a loan with more flexibility will come with a higher interest rate. But, depending on your needs, the flexibility may be worth it, as long as the rate isn’t too steep.

If you are able to make additional payments, you could pay off your loan early, reducing its overall cost. So, in this case, the flexibility of making extra payments could be worth it. Of course, as long as you’re not paying too high a rate overall.

Another loan feature that could be a worthwhile option is a redraw facility. This allows you to take back any extra payments you’ve made. This way you can put as much money as possible towards your loan, thus reducing your interest payments, while still having the freedom to take that extra money back should you need to.

Loan term

Loan terms stretch from just a few months, to a few years. However, while a longer term might look attractive, because it comes with lower monthly repayments, you could end up paying a lot more in interest.

For example, the median car loan interest rate on Canstar’s database is 14.95% p.a. For a loan of $15,000, over:

Three years, you’ll pay: $520 p/m. Total interest on loan: $3706

Five years, you’ll pay: $356 p/m. Total interest on loan: $6387

So while the monthly repayment for a five year loan is less, over the total life of the loan you’ll end up paying extra interest of: $2681.

→Learn more: Canstar’s Car Loan Repayment Calculator

Searching for a cheap car loan?

The table below displays some of our referral partners’ unsecured personal loan products for a three-year loan of $10,000 in Auckland (some may have links to lenders’ websites). The products are sorted by Star Rating (highest to lowest) followed by company name (alphabetical). Use Canstar’s personal loan comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals.

Compare personal loans with Canstar

About the author of this page

This report was written by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.

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