Car Loan Refinancing

What is car loan refinancing?

Refinancing means taking out a new loan to pay off your existing car loan. The new loan may be with the same lender or a different one, and it can come with a different interest rate, term, repayment amount or set of features.

Common reasons people consider it

• Interest rates have changed since the original loan was taken out
• Their credit history or income has changed
• They want a different loan term or repayment amount
• They want different features, such as extra repayments without fees
• They want to move away from dealer finance arranged at the time of purchase

Costs to check first

Comparing the total cost of both loans over the remaining term, including all fees, gives a clearer picture than comparing interest rates alone.

• Early exit or break fees on your current loan
• Establishment or application fees on the new loan
• Ongoing monthly or account keeping fees
• Any balloon payment still owing on the current loan

How the loan term affects total cost

Extending the term can reduce each repayment but may increase the total interest paid over the life of the loan. Shortening the term usually means higher repayments but less interest overall.

What lenders typically look at

• The current payout amount on your existing loan
• The age, kilometres and value of the vehicle
• Your income, expenses and other debts
• Your credit history and repayment record

Getting your payout figure

Your current lender can provide a payout figure, which is the amount needed to close the loan on a given date. This figure usually includes any fees and accrued interest, so it may differ from the balance shown on your statement.