Quick answer
A car loan with bad credit is possible in Australia, but lenders usually weigh the default or arrears history, your income stability and the vehicle itself, and may ask for a larger deposit, a shorter term or a guarantor. Fees and structure vary widely, so comparing offers and reading the contract carefully matters more than speed.
Key points
- Lenders look at why the credit problem happened, how long ago and what has changed since.
- ASIC's 2025 car finance review found big differences in fees, early defaults and shortfalls after repossession.
- A deposit, a stable income and a sensible vehicle choice often do more than any other single step.
- Comparing the total cost, fees and flexibility is more useful than comparing only the repayment.
Can you really get a car loan with bad credit?
Yes, many people with a rocky credit history do get car finance in Australia, but the process is different. Mainstream lenders can be strict about defaults and recent arrears. Others specialise in borrowers whose files are less than perfect and assess more of the story: why the problem happened, how long ago, what has been repaid and what your income looks like now. The trade-off is usually a narrower choice, a closer look at the vehicle and a greater need to read the contract carefully.
Ownright Custom Finance arranges car, truck and personal finance Australia-wide. Director Trevor Scott has more than 40 years in finance, and our approach to difficult car loans is the same as everything else we do: find the solution that fits, including ones you may not have heard of.
What counts as bad credit?
Credit reporting bodies hold information that lenders use. Items that can be treated as adverse include:
- Defaults: unpaid debts listed after a period of non-payment, whether paid or unpaid.
- Late payments: repayment history information showing missed or late payments.
- Court judgments and insolvency: bankruptcy, debt agreements and personal insolvency agreements.
- Multiple recent enquiries: a string of applications in a short space of time can signal stress.
Lenders weigh these differently. A single small default that has been paid and is some years old is not seen like several recent unpaid listings or an insolvency event. People can usually obtain a free copy of their credit report from the credit reporting bodies, and it is worth checking for errors before applying. Our guide on improving your credit before you apply covers this.
What do lenders look at beyond the credit file?
For adverse-credit car loans the credit file is only one input. Lenders also look at:
- Income and employment: a stable job or established income carries a lot of weight. Self-employed borrowers should see self-employed car loans.
- Deposit or trade-in: more equity upfront reduces the lender’s risk.
- The vehicle: age, price, type and resale value. Older or unusual vehicles can be harder to finance.
- Living costs and debts: whether the repayment fits comfortably after existing commitments.
- Time since the problem: a few years of clean conduct can change a lender’s view.
- Explanation: a short, honest account of what happened and what has changed.
What did ASIC find about car finance?
In November 2025 ASIC released findings from a review of eight car finance providers. According to ASIC, the review found:
- Gaps in some lenders’ oversight of distributors, including problematic sales tactics.
- Large cost variations, including very high establishment fees relative to loan size.
- Almost half of consumers who defaulted did so within the first six months.
- For repossessed and sold vehicles, nearly 90 per cent of consumers still owed more than half their original loan.
- Possible unaffordable lending, a point ASIC raised itself.
ASIC wrote to each lender with recommended improvements, including better hardship communication and oversight of brokers and dealers, and said detailed findings were due in 2026. MoneySmart also notes that earlier ASIC work on over 350,000 car loans found big differences in fees between providers. The practical message for borrowers is that the cheapest-looking weekly repayment is not the whole story, and that the loan’s structure and fees can matter as much as the headline.
How do you compare bad credit car loan offers?
| What to compare | Why it matters |
|---|---|
| Comparison rate and total repayable | Includes interest and most fees; compare on the same amount and term |
| Establishment and broker fees | MoneySmart notes dealers or introducers may take fees; ask who is involved |
| Ongoing and exit fees | Monthly fees, missed-payment fees and early repayment charges |
| Fixed or variable | Fixed gives certainty; variable can be easier to repay early |
| Balloon or final payment | Lowers repayments but leaves a lump sum and generally costs more overall |
| Term | A longer term lowers the repayment but adds cost and increases negative equity risk |
| Hardship and surrender options | What happens if things go wrong |
MoneySmart also warns of negative equity: if you sell the car, its price may not cover the remaining debt. That risk is bigger with a long term, small deposit or fast-depreciating vehicle.
How can you improve your chances?
- Check your credit report for errors and old listings that should have been removed.
- Save a deposit, or plan a trade-in, to reduce the loan size.
- Choose a sensible vehicle: a reliable car that suits the budget is easier to finance than a stretch purchase.
- Gather evidence of income and keep recent bank statements tidy.
- Avoid applying everywhere. Multiple enquiries can hurt. Speak to a broker first to find the lender most likely to say yes.
- Be upfront. Explain the credit history. Lenders prefer honesty to surprises.
- Consider a guarantor, understanding the risk they take on.
When might other finance be a better fit?
A car loan is not the only way to buy a vehicle. If you own property with equity, a secured personal loan or a small second mortgage may offer different terms, though it puts your home at risk. Our guide on personal loan versus second mortgage compares them. For business use, a chattel mortgage may apply; see chattel mortgage explained. If you already have a car loan that is too expensive, car loan refinance may be an option, subject to equity in the vehicle.
Does the type of car matter?
Yes. Lenders favour vehicles that hold value and are easy to sell, such as common makes and models of reasonable age. Very old, high-kilometre or unusual vehicles can be harder to finance, and lenders may cap the age at the end of the term. For adverse-credit borrowers a sensible car with a realistic price helps the whole application: the loan is smaller, the repayment is easier and the risk of owing more than the car is worth is lower. Think of the vehicle as part of the lender’s security, not only your transport.
Should you use a broker, or go direct to a lender?
Going direct is fine when you already know a lender will approve you. With a troubled credit file, each declined application leaves a record, and dealer finance can come with extra fees. A broker can check which lenders suit your profile before anything is lodged, compare costs on a like-for-like basis and explain the contract in plain English. Brokers are paid in different ways, so ask how yours is paid and what fees apply, as MoneySmart recommends for anyone involved in arranging a car loan.
What mistakes should you avoid?
- Signing at the dealership under time pressure without comparing.
- Accepting add-ons or insurance bundled into the loan without understanding the cost.
- Choosing the longest term to lower the repayment, then paying far more overall.
- Borrowing the maximum offered rather than what the budget supports.
- Ignoring hardship options if you fall behind. Contact the lender early.
- Assuming a decline means no one will lend.
Is it better to buy from a dealer or privately when your credit is poor?
Both are possible, and each has trade-offs. Dealers often have finance on offer and can move quickly, but MoneySmart cautions that a dealership may arrange a loan in which several parties take fees, so it is worth asking who is involved and what additional fees apply before you sign. A dealer’s convenience can be worth having, but the finance should still be compared against at least one independent option.
Private sales can give you more bargaining power on price, and lenders do finance them, but they add steps. The lender will want to confirm the seller owns the car and that no other finance is registered against it. Checks of the registration and any encumbrance are standard, and skipping them can leave a buyer with a car that another party can reclaim. A broker can handle the paperwork for a private purchase, though it may take longer than a dealer sale.
What should you do if you are already struggling with a car loan?
If you have a loan that has become hard to manage, act before you miss repayments. Lenders have hardship processes, and ASIC has pushed car finance providers to communicate better about hardship arrangements, including information on voluntary surrender options. Options can include temporarily reduced repayments, extending the term or, in some cases, refinancing. If you are in financial difficulty, a free financial counsellor can help negotiate; the National Debt Helpline is one starting point.
Selling the car yourself can be better than repossession, since you control the timing and price, but check first whether the sale proceeds will clear the loan. If you owe more than the car is worth, that shortfall remains a debt. Our page on car loan refinance outlines when moving to a new lender helps and when it does not.
How long do credit problems stay on file, and does it improve?
Credit reporting rules set how long different items remain on your file, and the periods vary by type of listing. The timing of when a default falls away, or when late payments disappear, is worth checking against your own report. As listings age, and especially once new positive conduct builds, lenders generally look more favourably on an application. That is why some people choose to wait, tidy their file and apply later, while others need a car now and accept a more expensive loan with a plan to refinance after twelve months of clean repayments. Neither is wrong; the right answer depends on how urgently you need the vehicle.
An illustrative example
An illustrative borrower has two small defaults from a few years ago, both now paid, and has been in the same job since. They need a reliable car to get to work. Several mainstream lenders decline. A broker reviews the file, confirms the listings are accurate, suggests a modest vehicle with a deposit from savings and approaches a lender that assesses adverse credit cases individually. The terms are not the cheapest in the market, but the borrower has a manageable repayment, understands the fees and has a plan to refinance after a clean run of payments. The path matters more than any single product.
What documents should be ready?
- Photo ID and proof of address.
- Recent payslips or tax returns, plus bank statements.
- Details of existing debts and credit cards.
- Information about the vehicle, such as the dealer’s quote or a private sale listing.
- Evidence of deposit funds or trade-in value.
- A short note explaining any credit issues.
How can Ownright help?
We compare lenders who are comfortable with complex files and explain the costs and trade-offs in plain English. We do not promise approval, and each lender sets its own criteria. If you would like to talk through your situation, tell us about your car loan needs and we will go through your options before you sign anything. Our bad credit car loans page has more background.
Frequently asked questions
Can I get a car loan with bad credit in Australia?
Often yes, though the choice of lenders narrows and terms change. Lenders that specialise in adverse credit look at the nature of the listings, how recent they are, your current income and the car being financed. Expect questions about what happened and what has changed, and expect to provide evidence.
What counts as bad credit for a car loan?
Common items include defaults, late payments, a bankruptcy or debt agreement, court judgments and many recent credit enquiries. Lenders weigh them differently. A single small paid default from years ago is generally treated very differently from several recent unpaid listings or an insolvency.
Will a bigger deposit help with a bad credit car loan?
It usually helps. A larger deposit reduces the amount borrowed, lowers the lender's risk and can make an approval more likely or the terms more manageable. A trade-in can serve as a deposit. The right level depends on the lender and your circumstances.
Are bad credit car loans more expensive?
Generally, loans for higher-risk borrowers cost more because lenders price for the risk, and fees can add up. Pricing depends on the individual. That is why comparing the comparison rate, fees and total repayable matters, and why a broker comparing options can be useful. Ownright does not quote rates in advance.
What did ASIC find about car finance?
ASIC's review of car finance providers, released in November 2025, found weak oversight of some distributors, large differences in establishment costs, almost half of defaulting consumers defaulting within six months, and nearly 90 per cent of repossessed-vehicle borrowers still owing over half the original loan. ASIC said lenders must lift standards.
Should I consider a guarantor or a cheaper car?
Both can help. A guarantor with a stronger profile may open more lenders but takes on real risk, since they become liable if you cannot pay. A less expensive, newer-enough vehicle reduces the loan size and the shortfall risk if things go wrong. Talk through both with us before choosing.