What you need to know about refinancing a car loan
You can refinance your car loan to unlock a lower rate, saving you money.
To switch, start by comparing loans and make sure your new car loan works out to be cheaper.
Pay attention to the loan term and fees before refinancing. And check your credit score.
How to refinance a car loan in 5 steps
Compare car loans. Compare car loans from multiple lenders and find a loan with a lower rate that suits your needs.
Do the maths. Use a calculator and work out the cost of the new loan, including fees and how the loan length and interest rate affect your repayments. Don't forget about any exit fees from the old loan.
Apply for the new loan. Complete the lender's application process and make sure you have all the paperwork and identification documents you need.
Discharge the old car loan. You will need to pay off and discharge the old loan. Your new lender should help you with this process.
Start repaying your new car loan. Once the new loan is approved you can concentrate on paying it off.
Finder survey: What percentage of Australians have refinanced a car loan?
Response
No
63.97%
I have never had a car loan
29.65%
Yes
6.38%
Source: Finder survey by Pure Profile of 1113 Australians, December 2023
How car loan refinancing can save you money
Refinancing a car loan means applying for a new loan and paying off the old one. You can refinance a car loan to get a better deal with a new lender and to get out of debt faster.
You should aim to refinance to a new car loan with fewer fees and a lower interest rate than your old one. This saves you money.
Example: refinancing a car loan to lower your repayments
You have a $20,000 car loan with a 12% interest rate. It's a 4-year loan and after 1 year you've paid off $5,000. This leaves you with an outstanding debt of $15,000 over 3 years.
Since getting the loan your credit score has improved significantly. You are confident you can now get a much lower interest rate.
You find a new loan with a rate of 7%. After comparing the loan fees and repayments, you apply for a new 3-year loan and borrow $15,000.
At 12% over 4 years, your old car loan repayments were $527 a month. With your new, lower-rate loan the repayments are just $464 a month over 3 years.
Car loan refinance calculations
Here are 3 similar car loans with different interest rates. You can see how the lower interest rate saves you money over time.
Loan 1
Loan 2
Loan 3
Loan amount
$30,000
$30,000
$30,000
Interest rate
15%
10%
7%
Loan term
4 years
4 years
4 years
Monthly repayment
$835
$761
$719
Total loan cost
$40,077
$36,523
$34,483
Looking at these examples, loan 3 works out to be $2,040 cheaper than loan 2 and $5,594 cheaper than loan 1.
These are just simple examples and don't include loan fees.
6 car loan refinancing traps and mistakes to watch out for
Make sure you refinance to a new loan that's both cheaper than the old one and suitable for you.
Factor in all the costs of both loans
Look at the new car loan's application and monthly fees, and any discharge or exit fees that come with your old one.
Pay attention to the loan term
Let's say you have a 5-year loan term. After 2 years you decide to refinance to a new 5-year loan. This means you're actually extending your 5-year debt into a 7-year debt (2 years of the original loan plus 5 for the new one). This means you'll pay more interest over the longer term.
Choosing the right loan term is about finding a balance between manageable monthly repayments and the overall interest you pay.
If the loan term is too long you'll have small monthly repayments but your lender will get a lot more interest from you. A shorter term means higher monthly costs but you'll get out of debt faster.
Make sure the new loan is the right type of loan for you
There are some differences between car loans. Some have fixed or variable interest rates, and some allow you to make extra repayments.
Make sure your car is eligible for the new loan before you refinance. If your car is too old or the wrong model, you might not qualify for a particular loan.
Check your credit score before refinancing
Before refinancing, check your credit score. Many lenders determine your car loan's interest rate based partly on your credit score. If your score is good or excellent you have a strong chance of getting a good deal.
If your score has fallen since you took out the original car loan you'll probably need to improve your score before refinancing.
Don't forget about depreciation
Cars lose value quickly, especially new ones. This can be a problem when refinancing if your car is used to secure the loan.
If you bought a brand new car worth $32,000 and it loses 10% of its value as soon as it's sold and a further 10% a year, after just 2 years the car would be worth $23,328.
If your car's depreciation outpaces the outstanding loan amount you might have a harder time refinancing. This is less of a problem if you've paid off a good chunk of the loan or if you paid some of the car's total cost upfront.
Avoid over-applying for loans
Every loan application impacts your credit score. Avoid applying for multiple car loans at once. You can only refinance to one loan, so find the best one for you, make sure you're eligible and then apply.
If your credit report has multiple loan enquiries then a lender will consider you a higher-risk borrower. You may end up on a higher rate or have your application rejected.
Frequently asked questions
You can refinance a car loan with a below average credit score but you won't get a competitive interest rate. If your credit score has gotten worse since you took out your original car loan then refinancing means you might end up with a higher rate.
Some lenders charge exit fees for ending a loan early. Fixed rate loans have the most expensive fees for breaking the loan and ending it early.
Before refinancing, check the costs of discharging your old loan by contacting your lender. For the new loan, check that it allows you to make extra payments.
Not necessarily. Applying for any loan causes a small dip in your credit score. But your score will bounce back in a couple of months as you repay the loan.
The main focus for any borrower should be the loan itself. Is the rate lower? Are there fewer fees? Are you eligible?
But there are some real differences between lenders. Online lenders often have competitive rates and fast approvals. But if you're already banking with a big bank it may already have all the details it needs from you, plus a handy app to manage all your finances.
Elizabeth Barry was the lead editor for Finder. She has over 10 years' experience writing about a range of topics with a focus on personal finance. You’ll find her writing and commentary in a range of publications and media including Seven News, the ABC, MSN, the Irish Times and Singapore Business Review. See full bio
Elizabeth's expertise
Elizabeth has written 211 Finder guides across topics including:
Want to buy a classic car but don't have the ready money? There are still financing options available for classic vehicles. Find out what loans you have to choose one and which one will work best for you.
If you've come to the end of your novated lease and you are left with a balloon payment, you might be wondering whether to refinance that into a personal loan or take on another novated lease.
If you've been wanting a boat but didn't know where to start, read up a range of boat loans you can apply for. Secured and unsecured options are available and you could have the funds the next business day.
You can still get a car loan if you want to finance a used car. Find out how you can get a used car loan and see what rates are available for the used car you want. Learn how to best compare lenders and apply for your loan today.
Finding the right car loan shouldn't be as hard as finding the right car. Get a loan that will give you pre-approval so you can go shopping with the right amount of funds.
Since you’re looking for refinancing options for your car, the guide above will give you ideas and tips on how to go about getting one. You may compare the car loan refinancing products above and click the Go to Site button of your preferred loan product.
Please make sure to meet all the criteria and the requirements before submitting the application. Please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision and consider whether the product is right for you. We also recommend that you get in touch with the lender.
Should you wish to have real-time answers to your questions, try our chat box on the lower right corner of our page.
Regards,
Jhezelyn
SavvasAugust 31, 2017
I have a car loan and I would like to refinance it somewhere else with a better interest rate
JonathanAugust 31, 2017
Hello Savvas,
Thank you for your question.
You are on the right page! :)
You may put your loan amount and the desired term on the calculator at the top of the comparison table. This will help you get the figures down for the loan you’re likely to be comfortable with in terms of repayments.
It is worth mentioning that you need to review the qualifications and the loan terms prior application.
Hope this helps.
Cheers,
Jonathan
AJDecember 5, 2016
Good Afternoon,
I am looking to refinance my Harley Davidson motorcycle. The interest rate is extremely high.
The only default I have is from over 5 years ago – no current credit cards, no credit issues.
Is there another option I have to re-finance? Payout figure is approximately $28K
Finder
MayDecember 6, 2016Finder
Hi AJ,
Thanks for your question.
You may try contacting a motorcycle loan lender for your motorcycle refinancing options. Please note that your approval will be on a case-by-case basis so make sure to read the criteria and requirements before you apply.
Hope this helps.
Cheers,
May
bobMay 25, 2016
I have an existing car loan and im wanting to borrow an extra $20000. Adding it to my loan. Is that possible? Is that refinancing?
Finder
ElizabethMay 25, 2016Finder
Hi Bob,
Refinancing involves you taking out a new loan to pay out your existing loan, so borrowing an additional $20,000 on your existing loan is just “topping up” your loan. You’ll need to get in touch with your lender to find out if this is possible and what the process is to apply.
Hope this helps,
Elizabeth
Finder
ElizabethMay 12, 2016Finder
Hi Roy,
As a financial comparison service we can’t offer you personal advice, but any of the lenders on the page above can help you with car loan refinancing. You can use the table above to compare them. You can also click the “Speak to a broker” tab if you’d like some advice from a car loan broker.
Hope this helps,
Elizabeth
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
Finder makes money from featured partners, but editorial opinions are our own.
Finder is one of Australia's leading comparison websites. We are committed to our readers and stand by our editorial principles.
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Hello Sony,
Thank you for your comment.
Since you’re looking for refinancing options for your car, the guide above will give you ideas and tips on how to go about getting one. You may compare the car loan refinancing products above and click the Go to Site button of your preferred loan product.
Please make sure to meet all the criteria and the requirements before submitting the application. Please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision and consider whether the product is right for you. We also recommend that you get in touch with the lender.
Should you wish to have real-time answers to your questions, try our chat box on the lower right corner of our page.
Regards,
Jhezelyn
I have a car loan and I would like to refinance it somewhere else with a better interest rate
Hello Savvas,
Thank you for your question.
You are on the right page! :)
You may put your loan amount and the desired term on the calculator at the top of the comparison table. This will help you get the figures down for the loan you’re likely to be comfortable with in terms of repayments.
It is worth mentioning that you need to review the qualifications and the loan terms prior application.
Hope this helps.
Cheers,
Jonathan
Good Afternoon,
I am looking to refinance my Harley Davidson motorcycle. The interest rate is extremely high.
The only default I have is from over 5 years ago – no current credit cards, no credit issues.
Is there another option I have to re-finance? Payout figure is approximately $28K
Hi AJ,
Thanks for your question.
You may try contacting a motorcycle loan lender for your motorcycle refinancing options. Please note that your approval will be on a case-by-case basis so make sure to read the criteria and requirements before you apply.
Hope this helps.
Cheers,
May
I have an existing car loan and im wanting to borrow an extra $20000. Adding it to my loan. Is that possible? Is that refinancing?
Hi Bob,
Refinancing involves you taking out a new loan to pay out your existing loan, so borrowing an additional $20,000 on your existing loan is just “topping up” your loan. You’ll need to get in touch with your lender to find out if this is possible and what the process is to apply.
Hope this helps,
Elizabeth
Hi Roy,
As a financial comparison service we can’t offer you personal advice, but any of the lenders on the page above can help you with car loan refinancing. You can use the table above to compare them. You can also click the “Speak to a broker” tab if you’d like some advice from a car loan broker.
Hope this helps,
Elizabeth