When it comes to buying a car in Australia, you generally have three main options:
1. Paying in Cash: The easiest way, if you have the funds.
2. Getting a Car Loan: The most common route, where you borrow money from a bank or financial institution and pay it back over time with interest.
3. Leasing: Essentially renting the car for a period, with the option to buy it at the end of the lease term.
As a foreigner, getting approved for a car loan or lease might be a bit more complex, but it’s certainly possible.
Eligibility Criteria for Foreigners
To be eligible for vehicle finance, you’ll need to meet some basic criteria:
Valid Visa
Your visa type matters. Most lenders prefer if you have a permanent residency (PR) visa, but some might consider temporary visa holders, especially if you’re on a long-term visa. Student visas are often difficult to obtain financing for, so if you are on a student visa you’ll want to make sure you have the available funds to demonstrate the safety of your loan.
Stable Income
Lenders will want to see that you have a steady income from employment in Australia. This usually means you’ve been in your job for at least six months.
Good Credit History
A good credit score in Australia can significantly boost your chances of approval. If you’re new to the country and don’t have an Australian credit history, some lenders may consider your overseas credit history, but this varies.
As a temporary resident, you are unlikely to have a significant credit history in Australia. Instead, lenders will consider a range of other factors to assess whether you are a ‘safe’ borrower.
These factors include:
Visa length
Is your visa valid for longer than the duration of the loan applied for?
Visa type
Lenders may only offer a car loan to temporary residents holding certain types of visas. You have a better chance of success if your visa is sponsored by an employer.
Visa validity
If you are working multiple jobs, you could be in breach of your visa.
Income and profession
Can you show that you have regular income and a stable employer? Lenders will also take your profession into consideration.
Savings
If you can show that you have saved a deposit, or save money regularly from your income, lenders are more likely to view you as a safe borrower.
Expenses and debts
Lenders will consider your everyday expenses and other debts to determine whether you can afford to make repayments on the car loan without falling into financial difficulty.
Loan guarantor
If a close relative with a good credit report co-signs your loan, you may have a higher chance of being approved. Your loan guarantor accepts responsibility for the repayments if you default for any reason. Keep in mind, your loan guarantor will need to be an Australian citizen or permanent resident.
Visa duration
Most vehicle finance loans are five to seven years long, but lenders won’t set a loan term longer than your current visa term. The loan is generally set to expire at least 90 days prior to your current visa running out and lenders will only consider your current visa, not any pending applications or extensions.
This means you might have a very short loan term and could make repayments unaffordable. We would recommend SPEAK TO VISA LAWYER ABOUT RIGHT VISA, SPEAK TO BROKER, LIST ETC>
Regulations and Requirements
Here’s what you need to know about the rules and regulations:
Proof of Residency
You’ll need to provide documents like your visa, passport, and proof of address in Australia (like a utility bill).
Car Insurance
Comprehensive car insurance is typically required by lenders. It protects their investment in case of an accident.
Deposit
Some lenders may require a deposit, especially if your visa is temporary.
What Happens When You Leave Australia?
If you’re planning to leave Australia before your loan or lease is paid off, here’s what you need to consider:
Early Repayment
You can usually pay off your loan early, but check for any early repayment fees in your contract. These fees can vary depending on your lender and loan terms.
Selling the Car
Another option is to sell the car and use the proceeds to pay off the loan. However, be aware of the car’s depreciation and how much you still owe.
Transferring the Loan
Some lenders might allow you to transfer the loan to another person, but this is less common and can be complicated.
Leaving the Country
If you leave the country without paying off your loan, it could impact your ability to get credit in Australia in the future. It might also have legal implications, depending on your contract.
How can I boost my chances of car loan approval?
Getting approved for a car loan can be challenging for anyone, but doubly so for applicants without a proven track record of financial dependability inside of Australia. Luckily, there are some straightforward ways to improve your odds of getting approval.
Large deposit
Saving up for a large deposit demonstrates financial responsibility and also reduces the amount that you have to borrow.
Steady income
Lenders like to see a stable, reliable income, especially with paychecks deposited into an Australian bank account.
Aussie guarantor
If you can have someone else (ideally a citizen or permanent resident) back your loan, that can alleviate the concerns of a prospective lender.
Stable residence
Those who rent or own a home in Australia are demonstrating a commitment to sticking around and an ability to make large monthly payments.
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