Used car loans in New Zealand
A used car loan is a normal secured loan where the car you buy is the security. Lenders look at you first, meaning your income, spending and credit file, and at the car second, meaning its age, price and condition. Nobody can promise approval, and lenders decide case by case, so it pays to know what they weigh before you fall for a car.
The short answer
You can finance a second-hand car in New Zealand with the same kind of loan used for a new one. The lender lends against the car, so the car is the security. If repayments stop, the lender can take it. That is why a lender cares about what you are buying as well as who you are.
Used cars are cheaper to buy, which makes the loan smaller. A smaller loan is easier to fit into a budget. But a used car is also harder to value, can cost more to keep on the road, and loses value in its own way. This page walks through how that plays out.
Fair Finance is a referral service, not a lender and not a dealer. One application and one soft credit check go to a panel of approved New Zealand lenders. We are paid by the lender only if a loan settles, and that never changes your rate.
What a lender checks on the car
A lender asks three things about the car, and each affects the offer.
- Age and kilometres. Older cars with high kilometres are more likely to need repairs and are worth less as security. Lenders set their own limits, and they are not published as one standard. Some also tie the car’s age to the length of the loan, so a long loan on an old car may not be offered.
- Price against value. If you pay far more than the car is worth, the loan can be higher than the car’s value from day one. That is a risk for you as well as the lender, because selling the car would not clear the debt. Our glossary entry on negative equity explains why.
- Clear title. The car must have nothing owing on it to someone else. The lender will want the car to be free of other security interests, and so should you.
None of this is a pass-or-fail test you can work out in advance. Rather than guess, check the car’s details before you commit to buying it.
What a lender checks on you
Under the Credit Contracts and Consumer Finance Act, lenders must make reasonable inquiries so they are satisfied you can repay without substantial hardship. In practice they look at your income and how steady it is, your spending, your other debts, and your credit file. Our page on car finance requirements lists the documents most lenders ask for.
A weaker credit file does not close the door, but it can mean a higher rate, a smaller loan or a request for a deposit. If that sounds like you, read about low credit score car finance and how much deposit helps.
Sedan, hatchback or station wagon
Body style matters less to a lender than price, age and condition. It matters more to your budget.
- Hatchbacks are usually the cheapest to buy and run, which suits a tight weekly budget and a first loan.
- Sedans often sit a little higher in price for the same age, but they are common, so there is plenty to compare.
- Station wagons give you the boot space of a bigger vehicle, which can suit families and tradespeople, at a price that varies a lot by model and age.
Pick on what you can afford each week and what you need the car to do. A lender will ask for the make, model, year and price either way.
Dealer or private sale
Where you buy changes your protection, and sometimes your finance.
From a dealer. Registered used car dealers must display a Consumer Information Notice on each car, and online listings must link to it. Consumer Protection says buying from a dealer gives you more consumer rights than buying privately. If something goes wrong, the Motor Vehicle Disputes Tribunal can hear claims about dealer sales. Dealers often arrange finance on site, and may earn a commission for doing so, so ask what it is and compare the offer with something else.
From a private seller. Private sales are often “as is, where is”, which means problems after the sale are yours. A seller can also sell without a current warrant of fitness if the car is clearly marked that way. Lenders can usually still finance a private purchase, but they will want the car’s details and proof the seller owns it. Do a PPSR check first. A lender can repossess a car that still has money owing on it, even if you bought it in good faith.
A seller who sells more than six vehicles in a year must register as a dealer, and must tell you if they are selling in the course of a business.
Why the cheapest car is not always the cheapest loan
A very cheap used car can look like the safe choice. It sometimes is, but a few things work against it.
- Small loans can carry a higher rate. Lenders have fixed costs, so fees can weigh more on a small amount. Check the establishment fee as well as the interest.
- Repairs arrive after the loan does. A car that needs a new clutch or tyres in the first year adds to your weekly cost while the loan keeps running.
- Depreciation still happens. Sorted points out that most vehicles quickly go down in value. A car bought at $6,000 can be worth less than the balance owing if you pay it off slowly.
A sensible rule is to set a total weekly figure that includes the repayment, fuel, registration, warrant of fitness, insurance and servicing, then shop for a car that fits it. Our guide on what a car really costs to own lists the extras.
A worked example (illustrative numbers only)
Say you compare two used cars with the same illustrative 15 percent rate over three years.
| Older hatchback | Newer sedan | |
|---|---|---|
| Price | $8,000 | $14,000 |
| Loan | $8,000 | $14,000 |
| Weekly repayment | about $64 | about $112 |
| Total interest | about $2,000 | about $3,500 |
| Insurance, fuel and servicing per week (illustrative) | about $75 | about $65 |
| Weekly total | about $139 | about $177 |
The newer sedan costs about $38 a week more in this example. Whether that is worth it depends on how reliable each car is likely to be. These numbers are made up to show the method. Rates, fees and running costs vary, and the repayment calculator lets you test your own.
Steps to take before you sign
- Work out a weekly ceiling, including running costs.
- Ask a lender or run the quick check to see what is realistic before you shop.
- Choose a car in that range and check its history, including the PPSR.
- Get an insurance quote on the exact car.
- Ask for the disclosure statement and read the total repayable and the fees.
- Take the paperwork home if you feel rushed.
Lenders must give you a disclosure statement before you sign. It should show the total to repay, all fees and the security. If it is missing or wrong, the lender may not be able to charge interest or fees for that period.
Red flags
- A weekly price with no total. Ask for the total repayable.
- Add-ons rolled into the loan. Warranties, GAP and loan insurance raise the amount you borrow, and you pay interest on them.
- A big final payment. A low weekly figure that ends in a balloon can leave you owing a large sum.
- Pressure to sign today. A genuine offer will still be there tomorrow.
- A car with money owing. Check the PPSR.
- Anyone promising approval before they have seen your income and credit file.
How Fair Finance helps
Complete one online application and we run one soft credit check, which does not affect your score. We pass your details to our panel of approved lenders and show you the ones that fit. You can then shop at any yard or buy privately, and you are not tied to any dealer. Lenders decide case by case. Start with the quick check.
Checklist
- Weekly ceiling set, running costs included
- Documents ready: licence, proof of address, bank statements
- Car’s age, kilometres and price checked against what lenders accept
- PPSR check done
- Insurance quote obtained
- Disclosure statement read before signing
General information only, not financial advice. Rules and rates change, so check the official pages below.
Sources
Common questions
Can I get finance for a second-hand car in NZ?
Yes, most car lenders finance used cars as well as new ones. The car becomes the security for the loan, so lenders pay attention to its age, price and condition. Nobody can promise approval, and each lender decides case by case.
Is there a maximum age for a car I can finance?
There is no single rule. Each lender sets its own limits on age and kilometres, and they differ between lenders and with the loan term. Ask before you shop, because a car that is too old for one lender may suit another.
Is a used car loan cheaper than a new car loan?
The loan is usually smaller, so the repayment is lower. The interest rate is not always lower, and for older cars or weaker credit files it can be higher. Compare the total amount repayable, not just the weekly figure.
Can I finance a car I buy from a private seller?
Often yes, but it takes more care. Private sales are commonly sold as is, and a lender will want to know the car has nothing owing on it. Do a PPSR check before you pay anything.
What should I ask before signing a used car loan?
Ask for the disclosure statement, the total amount you will repay, every fee, and whether any insurance or warranty has been added to the loan. If a figure is missing, ask for it in writing before you sign.
See your repayments, then get a fair rate.
One application, one soft credit check, no obligation. We match you to the lender most likely to give you a fair go.