Best Car Finance NZ Guide: Compare Loans and Save

If you find the right car loan in New Zealand, you could save thousands of dollars over the life of the loan. Getting the best car loan deal is harder than ever because interest rates are going up and lenders are making it harder to get a loan.

This complete guide explains everything you need to know about getting a car loan in New Zealand in 2025. You’ll learn how to compare different loan options, what lenders look for, and how to avoid making mistakes that could cost you a lot of money in the future.

Making smart choices about car financing will put you in control of your financial journey, whether you’re buying your first car or upgrading to a newer model. The right loan can make your monthly payments easy to handle or cause you a lot of stress.

Getting to Know the Basics of Car Loans

Car loans with and without collateral

When you take out a secured car loan, your car is used as collateral. This usually means lower interest rates and higher loan amounts. If you don’t make your payments, the lender can take back your car. This makes these loans less risky for banks and other financial institutions.

You don’t have to put up collateral for an unsecured car loan, but the interest rates are usually higher. These loans only look at your credit score and income, which makes it harder for some people to get approved.

Most lenders in New Zealand prefer secured car loans for buying cars, especially newer ones. But if you’re buying an older car or want more freedom, unsecured options might be better.

Interest Rates That Are Fixed vs. Those That Are Variable

Your monthly payments will be the same every month with fixed interest rates. This stability makes it easier to plan your budget, but it could mean missing out if market rates drop a lot.

The official cash rate of the Reserve Bank of New Zealand and the state of the market both affect variable interest rates. You might benefit from lower rates, but higher rates could put a strain on your budget without warning.

Many financial experts say that fixed rates are the best choice for car loans, especially when the economy is shaky. The reliability of fixed rates often outweighs the possible savings from variable rates.

The Terms of a Loan and Their Effects

Car loan terms in New Zealand typically range from one to seven years. Higher monthly payments but less interest paid overall are the result of shorter terms. Longer terms lower monthly payments but raise the total cost of borrowing.

When choosing your loan term, think about how long you want to keep the car. Owing more than the car’s worth (negative equity) becomes more likely with longer loan terms, especially for new vehicles that depreciate quickly. 

Important Things to Think About When Picking a Car Loan

Fees and Interest Rates

It’s important to compare rates because they can be very different between lenders. Different banks, credit unions, and car finance companies offer different rates depending on your credit history and the car you’re buying.

To understand the comparison rate, which includes fees and charges, look beyond the advertised rate. Application fees, ongoing account fees, and early repayment penalties can add hundreds or thousands to your loan cost. 

Some lenders offer special rates for certain types of cars or groups of customers. These deals may be very good value, but they usually have strict requirements for who can get them.

Flexibility in Repayment

Things in life change, so look for lenders that let you change your payment schedule. Options like payment holidays, extra payments without penalties, and the ability to adjust payment frequency can prove invaluable. 

Some lenders let you make payments every week, every two weeks, or every month. Weekly or fortnightly payments can reduce interest costs by making payments more frequently, effectively shortening your loan term. 

Amount of the loan and deposit needed

Most lenders will lend you up to 100% of the value of your car, but putting down a deposit can help you get better loan terms and interest rates. A 20% deposit often gets you the best rates and shows that you are financially responsible.

Think about the whole amount you need, including things like registration, insurance, and any repairs or changes that need to be made right away. It might be cheaper to borrow money for these costs up front than to use credit cards or personal loans.

Requirements for a Credit Score

Your credit score significantly impacts loan approval and interest rates. New Zealand credit scores go from 0 to 1000, and scores over 700 usually get the best rates.

Before you apply, check your credit report to find and fix any problems. Even small changes to your credit score can save you a lot of money over the life of the loan.

The Best Car Loans in New Zealand for 2025

Big Banks

New Zealand’s biggest banks have good customer service and low interest rates on car loans. Many people choose ASB car loans or Kiwibank car loans, but each has its own features and interest rates.

If you already bank with them, getting a loan from them can help your relationship. Customers who are already with you might be able to get better rates or faster application processes.

Building Societies and Credit Unions

Credit unions in New Zealand often have some of the best car loan rates. Because they are owned by their members, they usually focus on serving those members instead of making the most money.

These lenders may have more flexible lending standards and offer more personalized service, which makes them great choices for borrowers with special needs.

Companies that specialize in car finance

Dedicated car finance companies know a lot about the car market and often work directly with dealerships. They might approve loans that banks turn down, and they can sometimes process applications faster.

Some lenders only lend to certain types of people, like those who want to buy classic cars, commercial vehicles, or people with bad credit..

Online Lenders

Digital-first lenders often have simple application processes and rates that are hard to beat. Because they have lower overhead costs, lenders can offer better deals to borrowers.

When choosing online-only lenders, think about how much customer service and support you might need during the loan term.

Ways to Make It More Likely That You Will Get a Car Loan

How to Build and Keep Good Credit

Pay all of your bills on time, keep your credit card balances low, and don’t apply for credit cards too often. These actions show potential lenders that you know how to manage your money well.

If you don’t have a lot of credit history, you might want to build it up slowly with a credit card or a small personal loan before you apply for car financing.

Giving full and correct information

It’s very important that the information you give is correct because lenders check it. If there are differences between your application and the documents that go with it, it could take longer to get approved or be denied.

Before you start your application, make sure you have all the necessary paperwork, such as recent pay stubs, bank statements, and ID.

Showing that you can afford it

Find out your debt-to-income ratio and make sure you can easily make the proposed payments. Most lenders like borrowers whose debt-to-income ratios are less than 40%.

When figuring out if you can afford a car, think about all the costs that come with it, like insurance, gas, maintenance, and registration.

How to Avoid Common Car Financing Mistakes

Taking out too many loans and what happens next

Taking out more money than you need or can afford can cause long-term stress. To lower the amount of your loan, think about getting a cheaper car or putting down more money.

Keep in mind that cars lose value quickly, especially new ones. If you borrow the most money, you might not have any equity for years.

Not paying attention to the fine print

Important terms and conditions in loan contracts affect your rights and responsibilities. Pay close attention to fees for early repayment, default, and insurance.

Some contracts require insurance or extended warranties, which raise the total cost. Before you sign, make sure you understand these rules.

Not Looking Around

Lenders have very different interest rates and terms. Taking the time to compare your options could save you thousands of dollars over the life of your loan.

Just because you’re already a customer doesn’t mean your bank has the best deal. When you compare and negotiate on your own, you often get better results.

Other Ways to Pay for a Car

Loans for buying a car for yourself

Because personal loans aren’t backed by your car, they give you more freedom. This method works well for older cars that may not be able to get a regular car loan.

Interest rates on unsecured car loans are usually higher, but you own your car right away.

Dealer Finance Deals

Car dealerships often work with banks and other lenders to set up financing. Dealer financing can be easy, but it might not always have the best rates or terms.

To make sure you’re getting the best deal, compare dealer financing offers with direct lender options. Dealers can sometimes get better rates because they have a lot of business with lenders.

Platforms for Peer-to-Peer Lending

P2P lending connects borrowers directly with individual investors, which could mean lower rates for borrowers with good credit.

These platforms may have more flexible terms than traditional lenders, but think about how good their customer service is and how well they protect you from the law.

Choosing the Best Option for Your Needs

Your personal situation, credit history, and financial goals will help you choose the best car loan option. Take time to understand your options and don’t rush into the first offer you receive. 

If you’re having trouble with complicated loan terms, you might want to talk to a financial advisor or mortgage broker who can help you work through them and get better terms.

The New Zealand car finance market continues evolving, with new lenders and products regularly entering the space. Stay informed about current rates and terms to ensure you’re getting the best possible deal. 

We know that it can be hard to find the right car loan at Business Kiwi. Our knowledgeable staff can help you sort through your options and put you in touch with lenders who are right for your needs. Get in touch with us today to talk about how you plan to pay for your car and take the first step toward getting the car you want with peace of mind.

Questions That Are Often Asked

Is it possible to get car financing in New Zealand without a down payment?

Yes, a lot of lenders will give you 100% car finance with no down payment. However, putting down a deposit usually gets you better loan terms and interest rates. Even a small deposit of 10% to 20% can have a big effect on how much you pay in interest overall.

In order to qualify for a car loan, what credit score do I need to have?

Even though different lenders have different requirements, a credit score above 600 usually makes it more likely that you’ll be approved. Most of the time, scores over 700 get the best rates and terms. Some lenders who specialize in this area will work with people who have bad credit, but they may charge higher interest rates.

How long will it take to get a car loan?

Depending on the lender and how complicated your application is, it can take anywhere from the same day to a few business days to process. Online lenders usually make decisions faster, but traditional banks may take longer but offer more complete service.

Should I get a car loan with a fixed or variable rate?

Because they make it easy to plan your budget and know how much you’ll have to pay each month, fixed rates are popular for car loans. Variable rates may save you money at first, but they can go up without warning. Most financial experts say that fixed rates are better for car loans because they are easier to plan for than variable rates, which are usually shorter.

Is it possible to pay off my car loan early without any fees?

Many lenders in New Zealand let you pay off your loan early without any fees, but some do charge fees for doing so. Before you sign, read your loan agreement carefully and ask about the terms for paying it off early. Being able to make extra payments can lower the total amount of interest you have to pay by a lot.