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How does car loan refinancing work?
To refinance your car loan, you’ll follow much the same process you went through when you got your loan originally.
Typically you’ll be refinancing with a different lender. Once you’re approved, the new lender will do a lot of the work for you.
They will request a payout letter from your current lender. They’ll then pay out your old loan and start you on your new one. Ideally with lower regular repayments or improved loan terms, or both.
Among borrowers looking to refinance their car loan, the average remaining loan balance is more than $30,000, according to Money.com.au's data. These borrowers stand to make significant savings by refinancing to a better deal.
Best refinance car loan interest rate comparison
Compare a selection of used car loan interest rates in Australia that may be available for car loan refinancing, with ranges based on the borrower's credit score and other factors. The table is sorted by lowest comparison rate.
Harmoney | |
|---|---|
| Car loan interest rate | 5.76% p.a. - 6.55% p.a. |
| Comparison rate* | 6.55% p.a. - 24.98% p.a. |
Now Finance | |
| Car loan interest rate | 6.75% p.a. - 21.65% p.a. |
| Comparison rate* | 6.75% p.a. - 21.65% p.a. |
Great Southern Bank (used vehicles up to 7 years old) | |
| Car loan interest rate | 6.49% p.a. - 15.04% p.a. |
| Comparison rate* | 6.86% p.a. - 15.44% p.a. |
Moneyplace | |
| Car loan interest rate | 6.52% p.a. - 19.19% p.a. |
| Comparison rate* | 6.95% p.a. - 20.77% p.a. |
Liberty Financial | |
| Car loan interest rate | 6.52% p.a. - 19.19% p.a. |
| Comparison rate* | 6.95% p.a. - 20.77% p.a. |
ING | |
| Car loan interest rate | 6.89% p.a. - 18.99% p.a. |
| Comparison rate* | 7.10% p.a. - 19.23% p.a. |
OMM | |
| Car loan interest rate | 6.57% p.a. - 18.99% p.a. |
| Comparison rate* | 7.19% p.a. - 21.78% p.a. |
Westpac (used vehicles up to 7 years old) | |
| Car loan interest rate | 5.99% p.a. - 12.99% p.a. |
| Comparison rate* | 7.20% p.a. - 14.14% p.a. |
Commbank (used vehicles up to 7 years old) | |
| Car loan interest rate | 5.99% p.a. - 11.99% p.a. |
| Comparison rate* | 7.41% p.a. - 13.35% p.a. |
St.George (used vehicles up to 7 years old) | |
| Car loan interest rate | 6.49% p.a. - 12.99% p.a. |
| Comparison rate* | 7.61% p.a. - 14.06% p.a. |
BankSA (used vehicles up to 7 years old) | |
| Car loan interest rate | 6.49% p.a. - 12.99% p.a. |
| Comparison rate* | 7.61% p.a. - 14.06% p.a. |
Bank of Melbourne (used vehicles up to 7 years old) | |
| Car loan interest rate | 6.49% p.a. - 12.99% p.a. |
| Comparison rate* | 7.61% p.a. - 14.06% p.a. |
Macquarie Bank | |
| Car loan interest rate | 6.99% p.a. - 11.60% p.a. |
| Comparison rate* | 7.97% p.a. - 12.55% p.a. |
NAB | |
| Car loan interest rate | 6.99% p.a. - 20.49% p.a. |
| Comparison rate* | 7.91% p.a. - 21.33% p.a. |
Plenti | |
| Car loan interest rate | 7.49% p.a. - 12.99% p.a. |
| Comparison rate* | 8.05% p.a. - 13.08% p.a. |
ANZ | |
| Car loan interest rate | 7.49% p.a. - 19.99% p.a. |
| Comparison rate* | 8.18% p.a. - 20.58% p.a. |
Society One | |
| Car loan interest rate | 8.20% p.a. - 24.89% p.a. |
| Comparison rate* | 8.27% p.a. - 25.64% p.a. |
Loans.com.au | |
| Car loan interest rate | 7.74% p.a. - 12.79% p.a. |
| Comparison rate* | 8.85% p.a. - 13.90% p.a. |
NRMA | |
| Car loan interest rate | 8.34% p.a. - 16.99% p.a. |
| Comparison rate* | 9.21% p.a. - 17.77% p.a. |
RACV | |
| Car loan interest rate | 8.34% p.a. - 16.99% p.a. |
| Comparison rate* | 9.21% p.a. - 17.77% p.a. |
Wisr | |
| Car loan interest rate | 9.74% p.a. - 21.49% p.a. |
| Comparison rate* | 9.90% p.a. - 22.46% p.a. |
Latitude Financial | |
| Car loan interest rate | 9.49% p.a. - 29.99% p.a. |
| Comparison rate* | 10.93% p.a. - 31.83% p.a. |
Fair Go Finance | |
| Car loan interest rate | 15.95% p.a. - 27.99% p.a. |
| Comparison rate* | 26.69% p.a. - 36.32% p.a. |
| Car loan interest rate | Comparison rate* | |
|---|---|---|
Harmoney | 5.76% p.a. - 6.55% p.a. | 6.55% p.a. - 24.98% p.a. |
Now Finance | 6.75% p.a. - 21.65% p.a. | 6.75% p.a. - 21.65% p.a. |
Great Southern Bank (used vehicles up to 7 years old) | 6.49% p.a. - 15.04% p.a. | 6.86% p.a. - 15.44% p.a. |
Moneyplace | 6.52% p.a. - 19.19% p.a. | 6.95% p.a. - 20.77% p.a. |
Liberty Financial | 6.52% p.a. - 19.19% p.a. | 6.95% p.a. - 20.77% p.a. |
ING | 6.89% p.a. - 18.99% p.a. | 7.10% p.a. - 19.23% p.a. |
OMM | 6.57% p.a. - 18.99% p.a. | 7.19% p.a. - 21.78% p.a. |
Westpac (used vehicles up to 7 years old) | 5.99% p.a. - 12.99% p.a. | 7.20% p.a. - 14.14% p.a. |
Commbank (used vehicles up to 7 years old) | 5.99% p.a. - 11.99% p.a. | 7.41% p.a. - 13.35% p.a. |
St.George (used vehicles up to 7 years old) | 6.49% p.a. - 12.99% p.a. | 7.61% p.a. - 14.06% p.a. |
BankSA (used vehicles up to 7 years old) | 6.49% p.a. - 12.99% p.a. | 7.61% p.a. - 14.06% p.a. |
Bank of Melbourne (used vehicles up to 7 years old) | 6.49% p.a. - 12.99% p.a. | 7.61% p.a. - 14.06% p.a. |
Macquarie Bank | 6.99% p.a. - 11.60% p.a. | 7.97% p.a. - 12.55% p.a. |
NAB | 6.99% p.a. - 20.49% p.a. | 7.91% p.a. - 21.33% p.a. |
Plenti | 7.49% p.a. - 12.99% p.a. | 8.05% p.a. - 13.08% p.a. |
ANZ | 7.49% p.a. - 19.99% p.a. | 8.18% p.a. - 20.58% p.a. |
Society One | 8.20% p.a. - 24.89% p.a. | 8.27% p.a. - 25.64% p.a. |
Loans.com.au | 7.74% p.a. - 12.79% p.a. | 8.85% p.a. - 13.90% p.a. |
NRMA | 8.34% p.a. - 16.99% p.a. | 9.21% p.a. - 17.77% p.a. |
RACV | 8.34% p.a. - 16.99% p.a. | 9.21% p.a. - 17.77% p.a. |
Wisr | 9.74% p.a. - 21.49% p.a. | 9.90% p.a. - 22.46% p.a. |
Latitude Financial | 9.49% p.a. - 29.99% p.a. | 10.93% p.a. - 31.83% p.a. |
Fair Go Finance | 15.95% p.a. - 27.99% p.a. | 26.69% p.a. - 36.32% p.a. |
5 steps to refinance your car loan
Here are the main steps involved when refinancing a car loan:
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Consider your options: Compare car loans based on eligibility criteria, interest rates, regular repayment amount, terms and fees.
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Check if your current lender will negotiate: If you’ve found better car loan deals elsewhere, check if your current lender will match them. If not…
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Make an application: Just like you did originally, except this time with a new loan and lender.
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The new lender repays your existing car loan: Once you’re approved, your new lender will settle your old loan by paying off the loan balance.
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Start your new car loan: Now that your old balance is settled, you begin making regular repayments on your new (hopefully better) loan.
Top 3 reasons to refinance your car loan
There are many reasons to refinance a car loan depending on your situation. But ultimately it boils down to getting a better or more suitable loan for you.
In my experience, these are the main reasons why you might refinance your car loan and how it can help you get a better deal overall.
1. Refinancing a car loan to reduce repayments
There are a couple of ways to reduce your repayments through a car loan refinance.
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You could simply get a lower interest rate on a different loan with the same term. This will reduce the regular repayment amount and the total interest paid over the loan.
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You can also reduce your repayments by extending your loan term. Just bear in mind that this may end up costing you more in interest overall.
2. Refinance your car loan with a better credit score
Your credit score plays a major part in determining what your car loan interest rate will be.
If your credit score has improved since you took out your loan initially, you may be able to take advantage by refinancing your car loan to a cheaper rate.
3. Refinance your car loan balloon payment
Some car loans include a balloon payment. This is a large, one-time payment at the very end of your loan that reduces your regular repayment.
When the balloon payment is due, some borrowers choose to refinance it. This means taking out a new loan and repaying the balloon amount in instalments rather than a single large payment.
How long does a car loan refinance take?
Most lenders have fast application and approval processes.
This means your car loan refinance could be completed in a couple of days.
Having documents like payslips and bank statements ready for your new lender to check can help speed up the process.
How soon can you refinance a car loan?
In general, it can be best to wait 12 months before refinancing a car loan.
For example, you might have needed to accept a high car loan interest rate initially because you had a default on your credit report. After 12 months of making your payments on time, you may be able to get a much better rate with a new lender.
Getting the timing right is important. Applying to refinance your car loan too soon could mean being declined. Leaving it too late might mean the possible savings won't be worth it.
Checking your credit score first is a good idea so you know where you stand and if now is a good time to refinance.
Is refinancing a car loan expensive?
Not necessarily. In fact, refinancing to a lower interest rate could save you thousands in interest and fees.
But there are costs to factor in, including:
- Early payout fees on your current loan
- Application/establishment fees for your new loan
You’ll need to check your current loan documents and the new lender’s fees to see what you’ll be charged for switching. Then weigh them up versus the savings to see if refinancing your car loan is worth it overall.
Our car loan calculator can help you work this out.
Car loan refinance example calculation
| Old car loan | New car loan | |
|---|---|---|
Loan amount | $25,000 | $25,000 |
Remaining loan term | 4 years | 4 years |
Interest rate | 12% | 8% |
Switching cost | n/a | $750 |
Monthly repayment | $658 | $629 |
Total to repay | $31,601 | $30,174 |
Saving (including switching costs) | n/a | -$1,427 |
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Car loan refinance FAQ
Get help from a real-life Money Matchmaker® from start to finish.
Can I refinance a bad credit car loan?
Generally yes. Plenty of people refinance a bad credit car loan to get a lower interest rate.
If you’ve made consistent payments for 12 months or more on your existing loan, your credit score may have improved.
If this is the case, you may now be eligible to refinance with *enders that were off limits when you first got your loan.
Could refinancing your car loan hurt your credit score?
Applying for a new loan, which is essentially what you are doing when you refinance, has the potential to impact your credit score in the short term. This is because new loan applications are recorded on your credit report.
However, if you avoid applying for multiple loans in a short space of time, refinancing your loan should not negatively impact your score in the longer term.
In fact, refinancing to a better deal could contribute towards improving your credit score over time as it would make your repayments more manageable.
Is it worth refinancing a car loan to a lower interest rate?
Whether it's worth refinancing your car loan to a lower interest rate will depend on a combination of factors:
- How much lower is the refinance rate compared to your current rate? The bigger the difference, the more likely it is you will save overall.
- How long is there left on your loan? The longer there is remaining, the more you will save with a lower rate.
- What is the remaining balance? If there is only a small balance remaining, the interest savings may not be enough to outweigh the switching costs.
- What are the switching costs? You'll need to factor these in when calculating whether the interest savings make the refinance worth your while overall.
Car Loans guides and resources
Where to next? Read our other car loan guides to understand more about your options for financing your next car.
Written by
Loans Expert
Shaun McGowan
Reviewed by
Editor
Sean Callery
AS FEATURED IN
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $30,000 over 5 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.
