Why Refinance Your Car Loan?
Refinancing your car loan means replacing your current loan with a new one, typically at a lower interest rate. This can save you thousands over the life of your loan and reduce your monthly repayments.
The Best Times to Refinance
When Interest Rates Have Dropped
If market rates have fallen 1% or more since you took out your loan, refinancing could save you significant money. For example, on a $30,000 loan over 5 years:
| Rate Drop | Monthly Savings | Total Savings |
|---|---|---|
| 1% | ~$14 | ~$840 |
| 2% | ~$28 | ~$1,680 |
| 3% | ~$42 | ~$2,520 |
When Your Credit Score Has Improved
If you've improved your credit score since your original loan, you may now qualify for better rates. This is common if:
- You've made 12+ months of on-time payments
- You've paid off other debts
- Previous defaults have aged off your report
When You Got Dealer Finance
Dealer finance rates are often 2-5% higher than what you could get from a bank or broker. If you financed through a dealership without shopping around, refinancing is almost always worth investigating.
When NOT to Refinance
- Near the end of your loan - Most interest is paid in early years
- High exit fees - Calculate if savings outweigh costs
- Negative equity - If you owe more than the car is worth
- Extending the term significantly - You may pay more interest overall
How to Refinance Your Car Loan
- Check your current loan details - Outstanding balance, interest rate, exit fees
- Get your credit score - Free from Equifax or Experian
- Compare new loan offers - Get quotes from multiple lenders
- Calculate the break-even point - When will savings exceed costs?
- Apply for the new loan - The new lender handles payout of your old loan
The break-even point is typically 6-12 months. If you plan to keep the car longer than this, refinancing usually makes financial sense.
Understanding Exit Fees
Check your current loan contract for:
- Early termination fees - Fixed amount or percentage
- Break costs - More common with fixed-rate loans
- Administration fees - Usually $50-$200
Frequently Asked Questions
Will refinancing affect my credit score?
There's a small temporary impact from the credit check, but a good payment history on the new loan will benefit your score long-term.
Can I refinance with the same lender?
Yes, some lenders will renegotiate your rate. However, you'll often get better offers by shopping around.
How long does refinancing take?
Typically 1-2 weeks from application to settlement of your old loan.
When refinancing makes financial sense in 2026
The Reserve Bank of Australia's cash rate has shifted multiple times across 2024 and 2025, dragging car loan benchmarks along with it. For borrowers who locked in rates between 2022 and 2024, refinancing now can shave between 1.5 and 4 percentage points off their interest rate, depending on credit profile and vehicle age.
The 18-month rule
Most secured car loans front-load interest in the first 18 months. Refinancing inside the first year rarely produces meaningful savings once exit fees and a new establishment fee are factored in. Borrowers 18 to 36 months into a 5 or 7 year term typically see the strongest net benefit because principal is still high enough to generate compounding interest savings.
Trigger events that justify refinancing earlier
- Credit score improvement of 50+ points since the original application
- Removal of a default or paid judgment from your credit file
- Completion of probation in a new role, unlocking prime lender access
- Discharge from Part 9 debt agreement or bankruptcy
- Cash rate movement of 75bps or more since settlement
Comparing exit costs against ongoing savings
| Current rate | New rate | Balance | Years left | Lifetime saving |
|---|---|---|---|---|
| 11.95% | 7.49% | $28,000 | 4 | $3,180 |
| 13.45% | 8.99% | $32,000 | 5 | $4,720 |
| 9.99% | 6.49% | $45,000 | 5 | $4,150 |
| 14.95% | 9.49% | $22,000 | 3 | $2,180 |
Indicative only. Standard rate from 6.49% p.a. (comparison rate 7.39% p.a.) for prime applicants.
Seasonal patterns in lender appetite
End of financial year (May to June) and the post-Christmas trough (late January to February) consistently produce sharper pricing as lenders chase volume targets. Conversely, October and November tend to tighten as risk teams reassess year-end provisions.
Documents you will need
- Current loan payout figure letter
- Vehicle registration and roadworthy where applicable
- Last 90 days of bank statements
- Two most recent payslips, or two years of tax returns if self-employed
- Comprehensive insurance certificate
FAQs
Will refinancing damage my credit score?
A refinance generates one credit enquiry, typically affecting your score by 5 to 15 points and recovering within 3 to 6 months. Multiple enquiries within a 14-day shopping window are usually treated as a single event by Equifax and Experian.
Can I refinance if my car is older than 7 years?
Yes. Several non-bank lenders on our panel accept vehicles up to 15 years at end of term, generally between 8.99% and 11.49% p.a.
What if I have a balloon payment?
Balloons can be refinanced into a new term, paid out, or rolled into a chattel mortgage if the vehicle is used predominantly for business.