Car loan, dealer finance or novated lease?

Last updated 3 November 2026 · Reviewed by 360 Asset Finance Compliance

How does a car loan work?

With a car loan, a lender lends you the money to buy the car and you make regular repayments over an agreed term. Most car loans are secured by the car itself, which means the lender can take and sell the car if you don't make the repayments. Some people use an unsecured personal loan instead.

Because you arrange the finance yourself, you can compare lenders before you commit. A car loan for personal use is regulated credit, so the loan must suit your needs and you must be able to afford the repayments.

What is dealer finance?

Dealer finance is a car loan arranged by the dealership as part of the sale. It can be convenient, with the car and the finance sorted out in one place. The trade-off is choice: a dealer usually works with a limited number of lenders. Dealers may also be paid for arranging finance.

If you're offered dealer finance, check:

• the interest rate, the fees and the total amount you'll repay
• whether any add-ons, such as extended warranties or insurance products, are included in the loan, what they cost and whether you need them
• whether there's a balloon at the end, and any early payout fees.

You don't have to take the finance a dealer offers. You can arrange your own and still buy the car from that dealer.

What is a novated lease?

A novated lease is a way of salary packaging a vehicle through your employer, with payments made from your pay. It's an agreement between you, your employer and the finance provider. The finance provider owns the car during the lease, and a residual amount is usually set at the start and is due at the end. Some also bundle running costs, such as fuel, servicing, registration and insurance, into the payments.

It's only an option if your employer offers salary packaging. If you change jobs, the lease generally comes back to you, or it may move to your new employer if they agree. Whether it suits you depends on your circumstances, so ask your employer and your accountant how it affects your pay and tax.

How do they compare?

• Who arranges it: you or your broker for a car loan; the dealer for dealer finance; you, your employer and a finance provider for a novated lease.
• Choice of lenders: as wide as you choose for a car loan; usually the dealer's lenders for dealer finance.
• How you pay: from your own account for a car loan or dealer finance; from your pay for a novated lease.
• Who owns the car: you, for a car loan or dealer finance; the finance provider during a novated lease.
• At the end: a car loan or dealer finance ends with the final repayment, plus any balloon; a novated lease ends with the residual.

What if the car is mainly for my business?

Depending on whether the car is for personal or business use, different rules apply. For a business vehicle, a chattel mortgage, finance lease or commercial hire purchase may be an option. Your broker will explain, and your accountant can tell you how each is treated for tax.

How can a broker help?

360 Asset Finance is a broker, not a lender. We compare car loans across our panel of lenders, and we can help with a novated lease if your employer offers salary packaging. We ask about your goals, income and expenses, and check that any loan we suggest meets your needs and that you can afford the repayments. The lender will assess your application against its criteria.

FAQs

General information only. It doesn't take into account your objectives, financial situation or needs, and it isn't credit, tax or legal advice. Finance is provided by the lender you choose and is subject to its lending criteria; fees and charges apply. 360 Asset Finance is a trading name of Kuone Consulting Pty Ltd (ABN 75 647 329 002), Australian Credit Licence 566705.