How much could you save by refinancing your car loan? - Data last updated on 19 May 2019

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Refinancing car loans

What is a refinanced car loan?

Refinancing a car loan simply means switching from one car loan to another. Car loan refinance can help borrowers get a better deal on a car they're currently paying off. By refinancing a car loan, a borrower could enjoy a variety of benefits, such as lower interest rates, lower or no fees at all, and easier payment options to help get the car paid off sooner.

If you get your car refinancing right, you could save hundreds or even thousands of dollars on your car loan, depending on how much you've borrowed.

Can I refinance my car loan?

Refinancing a car loan is not a difficult process and it's one you can undertake yourself, simply by comparing the available options, and then making an application with a lender.

If you don't have enough time to refinance your car loan yourself, or you could use some professional help getting started, a finance broker or financial adviser could point you in the right direction.

How do refinancing car loans work?

Refinancing a car loan simply means switching to a different lender. The car refinancing process works like this:

  • Compare the available refinance car loan options.
  • Calculate the costs you'd pay versus the benefits you'd enjoy by switching your car loan to a new lender.
  • Contact the new lender to make an application to refinance.
  • The lender will approve or reject your application based on your financial circumstances, your credit rating, and their terms and conditions.
  • You'll pay any required exit fees to your old lender and any upfront fees to your new lender.
  • Start making repayments on your new car loan!

Why do people refinance car loans?

There are great reasons regular people like yourself will opt to refinance car loans, and they range from lender variety, features on the car loan, or just looking to save money on a long car loan.

  • To save money: Lenders may offer better interest rates and fees when you're exploring your refinancing options, so you could enjoy reduced car loan repayments.
  • To manage a balloon payment: If you have dealer finance for your car, you may have enjoyed lower car loan repayments, but have a balloon payment that needs to be covered at the end of your loan term. Car loan refinancing may allow you to pay back the balloon over a longer period if you don't have the lump sum immediately available.
  • To join a better lender: Car loan offers vary, and lenders are always looking for new business. Refinancing with a new lender could let you enjoy discounts on other products, better customer service or other add-ons that may not have been available from your former lender.

What are the main features of a refinancing car loan?

Like other car loans, refinancing car loans are specialised personal loans, with the same kind of main features:

  • Interest rate: The percentage extra you'll pay back to your lender each year. May be set at a fixed rate that keeps your repayments consistent, or a variable rate that could rise or fall.
  • Comparison rate: An estimate of your car loan's overall cost, accounting for the interest charges as well as the standard fees.
  • Fees: Car loan fees can include upfront fees and ongoing fees, as well as fees for using certain features such as a redraw facility or exiting the loan early.
  • Security: Secured car loans use the car's value to guarantee the loan, which can mean lower interest rates. Unsecured car loans offer greater flexibility, though their interest rates are often higher.
  • Extra repayments: Some car loans let you pay extra when you can afford it, reducing the interest you're charged, and bringing you closer to exiting the loan early.
  • Redraw facility: Car loans offering extra repayments may also let you redraw money from your car loan when you're ahead on your repayments and find yourself in need of cash.

What are the pros and cons of refinancing car loans?

  • Lower repayments
  • Enjoy loan features
  • Join a better lender
  • More interest over longer term
  • Switching costs
  • Car age/model may limit loans


  • Lower repayments: Switching to a car loan with a lower interest rate can help make your regular car loan repayments more affordable.
  • Enjoy loan features: A new loan with the right features could add much needed flexibility to your car loan.
  • Join a better lender: Lenders offering better customer service or more convenient options could make life that little bit easier.


  • Pay more interest over longer term: If you refinance your car loan onto a longer loan term, your payments may be lower, but your loan will take longer to clear, meaning you'll pay more in total interest charges than on a shorter-term loan.
  • Switching costs (exit and upfront fees): The cost of break fees for leaving your old car loan and/or upfront fees for starting your new car loan could make refinancing less cost-effective.
  • Car age/model may limit available loan types: Some secured car loans may be limited to newer cars whose value can cover the loan value. Refinancing to an unsecured loan for an older car could mean paying a higher interest rate.


A bad credit car loan is a car loan for borrowers who have ‘bad credit’ or a bad credit history.

Some lenders refuse to offer bad credit car loans, because they believe there is an excessive risk that bad credit borrowers will not repay their loans. However, other lenders are willing to provide bad credit car loans.

Generally, these lenders charge higher interest rates for bad credit car loans than ‘prime’ car loans, reflecting the higher level of risk. Bad credit car loans may also have higher fees than prime car loans.

However, the big advantage of a bad credit car loan is that it allows borrowers with bad credit to access finance. Another advantage is that it could help bad credit borrowers improve their credit rating, assuming they make all their repayments on time.


^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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