You’ve finally found your dream car, and now it’s time to pay for it! When looking for finance, you’ve got options, and choosing the right one can make a big difference to what you pay over the life of your loan.
You can choose to go through a car loan broker or apply for a personal loan from a bank. Making the right decision all depends on your financial situation, credit history, and personal preferences. This guide covers some things to keep in mind to help make your decision a little easier.
Key takeaways
- Finance offered by a car loan broker compares loan options from multiple lenders, while a bank offers a direct process with no intermediary
- Broker commissions are paid by lenders, which may influence which loan options are presented to you
- Both brokers and banks can offer pre-approval so you know your budget before you go car shopping
- No matter which option you choose, check the comparison rate (not just the advertised interest rate) to understand the true overall cost
How does a car loan broker work?
A car loan broker works as an agent between you and various lenders. Rather than applying to one lender directly, you provide your details to the broker who then searches the market across multiple lenders to find a loan for you.
Car loan brokers typically get paid commission by the lender when the loan settles, or a trail commission paid over the life of the loan.
Using a car loan broker can be a convenient solution, saving you time researching and applying to lenders individually. Brokers typically have access to multiple lenders so may find more competitive interest rates for you. This can be particularly helpful if you’re self-employed, have a low credit score, or have a complex financial situation, as a broker may have access to lenders that specialise in non-standard applications such as when irregular income is a factor.
Once you choose a loan option, your car loan broker will assist you in completing the application process, which can include gathering necessary documents such as proof of identity and pay slips.
However, because brokers are often paid by lenders, their commission may influence the recommendations given to you, which may not always be in your best interests. Be sure to ask plenty of questions and read the fine print carefully before signing.
How does getting a car loan from a bank work?
Applying for a car loan directly through a bank means dealing with one lender. You apply for a car loan, the bank assesses your credit history and financial situation, and if your application is approved, funds are made available to purchase your new car or used vehicle.
When you apply directly with a bank, there are no commissions. Westpac offers pre-approval for car loans, which means you can lock in a borrowing limit and interest rate before you start looking at cars. Some brokers may offer pre-approval, too. This can help give you a clear budget and shop within your limitations.
Existing customers may also benefit through more competitive pricing or streamlined application processes. If you already have a relationship with a bank, it can be worth asking questions if you’re looking for a car loan.
Car loan broker vs bank: how they compare
| Feature | Car loan broker | Bank |
|---|---|---|
| Interest rates | Access to rates from various lenders which may be competitive | Rates are published in one consolidated place |
| Fees | Commissions or upfront fees may apply | Fees apply |
| Speed | Varies by broker and lender panel | Varies; existing customers may have faster processing |
| Range of options | Access to multiple lenders and loan options in one place | Limited to one bank’s products |
| Transparency | Commission structures may influence options | No commissions |
| Relationship benefits | Generally, no ongoing relationship with accounts | Existing customers may access benefits tied to broader banking relationship |
What about dealer finance?
A third option worth understanding is dealer finance. When you buy a car through a car dealer, their business can usually arrange finance on the spot. This can offer convenience, by purchasing your car and organising the money for it in one place, without any separate applications.
However, dealer finance can come with higher interest rates than banks or car loan brokers. Dealerships may also offer products with a balloon payment at the end of the loan term, which may mean your regular repayment amount appears more affordable over the loan term, but comes with a lump sum payment at the end of the term leading to higher overall costs for the buyer.
Dealers may also advertise low rates on new cars (which can depreciate faster in the first few years) or on stock they want to sell faster, which means you may not get the best deal on the car you want.
Again, it’s important to look at the total cost over the life of your loan and look for the comparison rate (the advertised rate plus establishment and maintenance fees).
Why pre-approval matters
Pre-approval can be a practical, helpful step when it comes to obtaining finance for a vehicle. It means you can search for cars you can actually afford, and you’ll know your approximate loan amount, loan term, and monthly repayments before you walk into a showroom and get tempted by a shiny new luxury car.
Pre-approval may also strengthen your negotiating position, as dealers understand you’re ready to go.
With Westpac, you can apply for car loan pre-approval online and get a personalised rate in minutes with no impact on your credit score, so you can shop with confidence.
Westpac’s secured car loans may be suitable for eligible petrol, diesel, or LPG cars, while our secured electric car loans or hybrid car loans may be suitable for eligible hybrid or electric or Plug-in Hybrid Electric Vehicles (PHEV). An unsecured personal loan may be suitable for eligible cars over seven years old, or when you don’t want to use the car as security.
Westpac’s Borrowing Power Calculator can help you see how much you could afford, while our car loan Repayment Calculator can estimate how much your monthly repayments would be.
Explore Westpac Car Loans
How to choose the right car finance option
The best car finance option depends on your financial situation and personal circumstances.
A bank may be the right choice if:
You’re an existing customer with an established banking relationship
- You prefer dealing directly with one lender
A car loan broker may be the right choice if:
- You’d like someone to compare multiple lenders and loan options on your behalf
- You’re comfortable with a commission-based model and have asked the right questions about how your broker is paid
- You have a complex financial situation such as irregular income
In any case, to make an informed decision, it’s important to do your research. Compare the comparison rate (not just the headline interest rate), ask about hidden fees and balloon payments, consider pre-approval, and use calculators and tools to look at different scenarios before you commit.
Explore the Westpac car buying guide
Frequently asked questions
Is it better to get a car loan from a broker or bank?
It’s totally up to you and depends on your financial situation. A bank may provide potential benefits for existing customers. A car loan broker can be valuable if you want to compare loan options across various lenders without doing the research yourself.
Do car loan brokers charge fees?
It varies. Many brokers are paid by the lender through upfront commissions or trail commissions, so you may not pay a fee directly. However, some brokers may charge fees to the borrower. Ask your broker upfront about how they are paid, which lenders are on their panel, and whether recommendations are influenced by commission rates.
Can I get pre-approved for a car loan at a bank?
You can apply for car loan pre-approval online with Westpac. Pre-approval confirms your borrowing limit and interest rate before you start seriously shopping the car sites or visiting a dealership, so you have a clear budget from the beginning. Some brokers may offer pre-approval, too.
What is the cheapest way to finance a car?
The cheapest car finance option really depends on factors like your credit history, loan amount, and financial situation. Generally, secured car loans, which use the vehicle as security, offer more competitive interest rates than unsecured personal loans.
You may want to avoid making your decision at the dealership under pressure, where dealer finance can carry higher interest rates.
To sum up
Whether you go through a car loan broker or apply directly with a bank, the most important thing is to understand what you’re signing up for. It’s all about finding a car loan that works for your situation today and over the full life of the loan. Comparing your options, reading the fine print, and having a clear budget can put you firmly in the driver’s seat!
Things you should know
This information is general in nature and has been prepared without taking your personal objectives, circumstances and needs into account. You should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice. Information is correct as of 01 June 2026.