Fixed vs Variable Rate Car Loans: Pros and Cons

Here’s a breakdown from the team at Hanna Lending, your local Perth finance broker.

What is a Fixed Rate Car Loan?

A fixed-rate loan means your interest rate and repayments stay the same for the duration of the loan term.

✅ Pros:

• Predictable repayments: Easy to budget with no surprises
• Protection from rate hikes: You're locked in even if interest rates rise
• Stability: Great for those on a fixed income or tight budget

❌ Cons:

• Less flexibility: Fixed loans often have limited features such as early repayment fees or no redraw facility
• No benefit if rates drop: You won’t gain from interest rate reductions during your loan term

What is a Variable Rate Car Loan?

A variable-rate loan means your interest rate can fluctuate depending on the market.

✅ Pros:

• More flexibility: Often comes with features like redraw or extra repayments
• Potential savings: If interest rates fall, so do your repayments
• Early exit options: Usually fewer fees for paying off the loan early

❌ Cons:

• Unpredictable repayments: Rates can rise, increasing your monthly costs
• Harder to budget: Less certainty if your financial situation changes

Which One is Right for You?

It depends on your circumstances. If you value stability and want to lock in a good deal now, a fixed rate could be best. If you can handle some risk and want the chance to save more in the long run, a variable loan might suit you better.

As your trusted finance broker in Perth, we’ll walk you through your options and help you find a loan that aligns with your goals, lifestyle, and budget.

Looking for expert help with your next car loan?
Hanna Lending is a leading finance broker in Australia, here to simplify the loan process and secure competitive rates for Perth locals and clients nationwide. Reach out for tailored advice today.