Car Loans for Pensioners

If you are in the market for a new car but don’t have enough cash saved to buy it outright, you may consider a car loan to finance your new set of wheels.

Generally, obtaining a car loan depends on a range of factors including whether your employment provides enough income in order to finance the loan. If you’re retired or receive government benefits like the pension or Centrelink, despite not being employed you could still be eligible.

What is a pensioner car loan?

Pensioner car loans are designed for those retired or receiving government benefits including the pension. To service any form of finance, income is required in order to meet repayments.

For pensioners, as long as you meet lending criteria and have consistent income - whether that be from investments or other assets, Centrelink payments, a disability pension, age pension or another kind of pension - a pensioner car loan could help you unlock your new set of wheels.

How much can you borrow with a pensioner car loan?

For a pensioner car loan the amount you will be able to borrow will not only vary from lender to lender, yet most importantly will depend on your individual financial circumstances.

While you do not necessarily need to be employed to be eligible for a pensioner car loan, your options may be more limited than those open to someone who is employed. You may be required to agree to a shorter loan term, agree to higher repayments or face a higher interest rate.

When comparing pensioner car loans, you may receive different interest rates from an array of lenders as a result of your financial position.

• Typically, lenders will charge less competitive rates on loans that are deemed higher risk.

• If you are a pensioner and you own assets, these could be used as security on a car loan to reduce the interest rate you pay.

Before you decide on how much you want to borrow, be sensible about your budget. Look at your pension payments against your expenses and be honest with yourself about how much you can afford to repay.

Consider paying down a deposit to show the lender you are able to save money when receiving a pension, and potentially improve your credibility with the lender. Borrowing a smaller amount could also prove to be beneficial, meaning you have less to pay in repayments and interest over the life of the loan.

What should I look for in a pensioner car loan?

When it comes to a pensioner car loan, there are a number of things to consider including:

Secured or unsecured loans

Secured loan may offer better interest rates but an unsecured loan may be less hazardous if your financial circumstances change and you fall behind on payments.

Interest rates

The lower the interest rate, the lower the size of your repayments. However, you should also factor in any fees and charges to determine the true cost of the loan.

Fixed or variable rates

Fixed rates will stay the same over your loan term, while variable rates change over the course of your loan with market factors. In favourable conditions, this means you may end up with a rate that decreases during your loan, but you also risk rates rising and having to pay more for your loan.

For pension car loans, a fixed rate loan may be more suitable than a variable rate loan as it provides peace of mind as to the size of your repayments.

Fees and charges

Generally, fewer and lower fees are better, but you might find a loan that offers more value for money in the long run, at the cost of higher initial fees. A car loan with some fees might also offer great flexibility in terms of extra repayments or early loan discharges, ultimately saving you money in interest costs in the long run.

Loan length

You will generally pay more in interest over a longer loan term, but the size of your regular repayments will be smaller. Lenders might offer better rates to those who can pay off the loan in a shorter period of time. Car loans are commonly anywhere from one to five years, though some lenders offer seven-year car loan options.

Age of car

If you want to buy a used car, it’s important to consider if a lender will offer finance for it. Many of the most competitive used car interest rates apply to cars only up to around five years old. Some offer finance up to a maximum of 12 years old - this means if your car is seven years old, you probably can’t get a car loan term longer than five years.

If you’re after an older car, or even want to finance a classic car, you might have to broaden your search.

How to apply for a pensioner car loan

Like any form of loan, in order to apply for a pensioner car loan specific lender requirements must be met. These include:

• Applicants must be aged over 18 to apply.

• Applicants must be an Australian citizen or permanent resident to apply.

• Applicants must have proof of regular income to cover your repayments and expenses.

• Applicants may be eligible for a pensioner car loan if you receive the aged pension, disability support pension, or Centrelink payments such as parenting or carer payments. Some allowances, like JobSeeker, Youth Allowance and Austudy may not qualify, and you could need to provide proof of supplementary income.