Car Loan Interest – Claim Back Savings Fast (2026)

Managing your finances can be challenging, especially when it comes to understanding what you can and cannot claim on your taxes. One common question is whether you can claim interest on your car loan. If you're feeling unsure, you're not alone. Many Australians share this confusion, especially as tax laws can be intricate and ever-changing. Fortunately, we're here to provide clarity on this topic, helping you make informed financial decisions.

Understanding Claiming Interest on Your Car Loan

In Australia, claiming the interest on your car loan is possible, but it largely depends on how you're using the vehicle. If your car is used for business purposes, you may be eligible to claim a portion of the interest as a tax deduction. However, for personal use, such as commuting to work or running errands, this option is not available. Understanding these distinctions is crucial in determining your eligibility for tax deductions related to car loan interest.

Eligibility and Current Market Information

To claim the interest on your car loan, the car must be used for income-generating activities. For instance, if you're self-employed or use your vehicle to travel for work (not including commuting), you can claim a proportionate amount of interest relative to the business use percentage of the car.

As of 2026, interest rates for car loans in Australia range between 6.49% and 12%, depending on your credit score and the lender's terms. With access to over 83 lenders, Esteb and Co can help you find the most competitive rates tailored to your financial situation.

Steps to Claim Interest on Your Car Loan

Here is a step-by-step guide to help you claim the interest on your car loan if you use your car for business purposes:

1. Determine Business Use Percentage: Calculate the percentage of time your car is used for business versus personal use. A logbook can help track this accurately.
2. Maintain Records: Keep detailed records of your car loan interest payments and any relevant documentation that supports your business use claim.
3. Calculate Deductible Interest: Apply the business use percentage to your total car loan interest paid to determine the deductible amount.
4. Report on Your Tax Return: Include the deductible interest amount in your tax return under the appropriate section for vehicle expenses.
5. Consult a Tax Professional: Consider consulting a tax advisor to ensure compliance with the latest tax laws and maximise your deductions.

Expert Tips and Considerations

When navigating the complexities of tax deductions for car loan interest, consider the following tips:

• Logbook Accuracy: Ensure your logbook entries are precise and up to date, as this is crucial evidence in case of an audit.
• Separate Accounts: Consider keeping a separate bank account for business-related expenses to simplify tracking and documentation.
• Review Annually: Tax laws can change, so review your eligibility and deduction strategies annually to stay compliant and efficient.
• Leverage Lender Options: With Esteb and Co's access to a broad panel of lenders, explore your refinancing options if your current interest rates are not competitive.

Frequently Asked Questions

1. Can I claim car loan interest if I only use my car to commute to work?
   No, commuting to and from work is considered personal use and does not qualify for interest deductions.
2. What percentage of car loan interest can I claim?
   The claimable percentage is based on the proportion of business use, as determined by your logbook.
3. Are there any other car-related expenses I can claim?
   Yes, you can also claim fuel, maintenance, registration, and depreciation based on business use.
4. Can I claim interest on a used car loan?
   Yes, the same rules apply to both new and used car loans as long as the vehicle is used for business purposes.
5. Do I need a tax professional to claim car loan interest?
   While not mandatory, a tax professional can help ensure accuracy and compliance with tax regulations.

Understanding the intricacies of claiming interest on your car loan can significantly impact your financial outcomes. By adhering to the guidelines and utilising the resources available through Esteb and Co, you can optimise your tax deductions and make informed decisions about your car loan needs.