To make comparing car loans even easier we came up with the Finder Score. Interest rates, fees and features across 200+ car loan products and 100+ lenders are all weighted and scaled to produce a score out of 10. The higher the score, the more competitive the product.
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.
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.
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.
Make sure you refinance to a new loan that's both cheaper than the old one and suitable for you.
Look at the new car loan's application and monthly fees, and any discharge or exit fees that come with your old one.
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.
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.
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.
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.
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.
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I am wanting to refinance my car loan, The payout figure is $14,000 and the interest is currently 23.99%. I am ex bankrupt but have been discharged and the &yrs were up oct 3rd 2015.
Can you help me with this. the car will be a secured loan.
Colleen
Hi Colleen,
Thanks for your question.
Please note that finder.com.au is an online comparison service and is not a product issuer. If you would like to discuss your eligibility or options, please get in touch with a lender featured on this page.
As an ex-bankrupt, your name will still appear on the National Personal Insolvency Index (NPII) which is accessible by lenders should they run a credit check. You may want to approach a smaller or second tier lender instead.
Cheers,
Shirley
Good afternoon, Shirley.
I am thinking to refinance my car but I don’t know where to start.
My current car ‘s loan is 5 years left out of 7 years.The interest rate about 14.5%. I think, I still have a total to pay about $40,000. Anyway that I make somewhere else lower interest rate in 4 or 5 years?
thank you very much.
Jin
Hi Jin,
Thanks for your question.
The process usually involves taking out a new car loan to pay out your existing one. Be mindful that there are switching fees and early loan repayment fees from your old loan, and application fees for your new loan.
You can compare a range of car loans above, but it would be best to speak to the lender first about your intention of refinancing and they can advise on the right processes.
Cheers,
Shirley
Hey, Shirley
Thank you so much.
You’re welcome!
Hi, Shirley
What if, I would like to change to a new car and use my current loan. Is it worth to do or better to sell it and buy a new one?
Thank you
Hi Jin,
Thanks for your question.
Please note that finder.com.au is an online comparison service and is not in a position to recommend personalised advice.
There are a lot of factors to consider, such as your personal situation, ongoing costs, the residual value of the vehicle and the value of the vehicle you intend to purchase. It’s probably best to speak to your lender regarding this as they’re in a much better position to answer this.
Cheers,
Shirley
I was a bankrupt until about 2 years ago and payed off a secured loan through this time.
Then about 18 months ago I arranged a $22,000 loan at about 30 percent ( $184.00 per week for 5 years) and have paid this faithfully, I also have been employed for 13 years at the same company.
My question is would it be better to try and refinance, or simply keep paying off the present loan.
Hi Phil,
Thanks for your question.
As a discharged bankrupt, your name will appear on the National Personal Insolvency Index (NPII), a register that is accessible by lenders should they choose to, after you have given permission during your application process.
Ultimately the decision is up to you whether it would be better to try and refinance or keep paying off the present loan. It’s advisable for you to speak to a financial advisor regarding the risks of both methods.
Cheers,
Shirley
Best way to start the process of refinancing my car.
Who to speak to.
I have a good credit rating, yet I need to lower my repayments.
Hi Tom,
Thanks for your question.
Please note that we don’t recommend specific products, services or providers.
If you’re looking to lower your repayments, you may want to consider a lower interest rate compared to your existing loan.
You can compare a range of personal loans above this page to see if you’re interested in any of the loans.
Cheers,
Shirley
I have a car loan with ge I want to up grade my car n loans.com how do i do that
Hi Paris,
Thanks for your question.
The process involves you taking out a new loan with loans.com.au for your car to pay out your existing loan with GE Money.
To find out more information or to apply for the loans.com.au car loan, please click on ‘go to site’ to be taken to their website to make an enquiry. Also, the team there will be advise on the refinancing process.
Cheers,
Shirley