Your circumstances rarely stay the same for the entire life of a car loan. Your income might have grown, your credit score could have improved or your budget might simply need more breathing room than it did when you signed up.
If your current finance deal isn't doing the job for you anymore, it’s important to know that you aren’t stuck with it. Refinancing your car loan lets you switch to a new product or lender that actually fits what you need and where you're at right now by potentially scoring a lower rate or reducing your repayments.
What is car loan refinancing?
Car loan refinancing is the process of replacing your existing car loan with a new one, either through your current lender or a different provider. The new loan pays out the remaining balance on your old one and you make repayments under the new terms instead, keeping the same car. It works in a similar way to refinancing a mortgage, just on a smaller scale and is a much shorter process.
Car loan interest rates
Interest rates correct as of August 2026.
Why might someone refinance their car loan?
Car loan refinancing can happen for several reasons, including:
- To secure a better rate: you might look to do this if interest rates have fallen or your financial position has improved over the course of your term to date.
- To reduce your repayments: the other main reason for refinancing, cutting back on the cost of repayments can be achieved by stretching out your loan term by several years.
- To reduce your loan fees: in the same way as aiming for a better rate, switching to a new loan with low or no fees could make your life easier.
- To remove a co-borrower or guarantor: many applicants sign up initially with another borrower or a guarantor, which can improve your approval chances. Refinancing is the only real way to remove them.
- To add a residual payment: by adding a residual or balloon payment, you’ll decrease your monthly repayments, but your interest bill will go up (and you’ll have to pay a lump sum at the end of the loan).
- To access new features: you may simply be looking to add features like free additional payments, a redraw facility or something else to your loan that you don’t have.
Can I refinance my car loan to consolidate debt?
If you're refinancing specifically to consolidate other debts, this will usually require you to switch from your secured car loan to an unsecured personal loan. This lets you combine your car debt with other debts like credit cards or personal loans into one repayment.
It’s worth noting that personal loan rates are typically higher than secured car loan rates, so you'll want to weigh the convenience of clearing your debts and taking on one repayment against the extra interest you may end up paying.
How much can I save by refinancing my car loan?
The amount you can save will depend on a range of factors, including the interest and fees, loan term, loan amount and balloon (if applicable). The following table shows how refinancing your loan to one with a lower rate can help you save:
| Interest rate | Repayments | Balance after two years | Interest after two years | Refinanced rate | New repayments | Total interest | Total saving |
|---|---|---|---|---|---|---|---|
| 9.50% p.a. | $630 | $19,669 | $4,790 | N/A | $630 | $7,803 | N/A |
| 9.50% p.a. | $630 | $19,669 | $4,790 | 9.00% p.a. | $625 | $7,638 | $165 |
| 9.50% p.a. | $630 | $19,669 | $4,790 | 8.50% p.a. | $621 | $7,474 | $330 |
| 9.50% p.a. | $630 | $19,669 | $4,790 | 7.75% p.a. | $614 | $7,229 | $575 |
| 9.50% p.a. | $630 | $19,669 | $4,790 | 7.00% p.a. | $607 | $6,985 | $818 |
| Calculations based on a $30,000, five-year car loan repaid monthly and do not include break or other loan fees. | |||||||
Lengthening or shortening your loan term can have an even bigger impact on your overall cost. Here's how that plays out on a loan of the same size:
| Loan term | Repayments | Time left on loan | Balance after two years | Refinanced term | New repayments | Monthly saving | Total interest | Total saving |
|---|---|---|---|---|---|---|---|---|
| 5 years | $601 | 3 years | $19,325 | N/A | $601 | N/A | $6,068 | N/A |
| 5 years | $601 | 3 years | $19,325 | 5 years | $387 | $214 | $7,662 | -$1,593 |
| 5 years | $601 | 3 years | $19,325 | 4 years | $467 | $134 | $6,856 | -$788 |
| 5 years | $601 | 3 years | $19,325 | 2 years | $870 | -$268 | $5,299 | $770 |
| 5 years | $601 | 3 years | $19,325 | 1 year | $1,677 | -$1,075 | $4,547 | $1,522 |
| Calculations based on a $30,000 car loan repaid monthly with a 7.50% p.a. interest rate and do not include break or other loan fees. | ||||||||
As you can see, refinancing from one car loan to another can bring with it significant benefits, whether that’s easing pressure on your monthly budget or slashing your interest bill.
It's worth noting that many lenders will charge break fees for ending your agreement early. This means that you could end up paying hundreds to exit your current contract, potentially negating a big chunk of the financial benefit of doing so.
Car Loan Repayment Calculator
Your estimated repayments
$98.62
| Total interest paid: | Total amount to pay: |
| $1233.43 | $5,143.99 |
Case study: To refinance or not to refinance?
Harriet is 12 months into her five-year car loan term. She purchased her 2015 Honda Civic in a private sale for $15,000 while she was still at university and working casually. Fast forward to today, though, and she’s completed her degree and has been working full-time for the last nine months at the same place.
Because of this, she not only wants to pay off her loan much more quickly but also believes that she’ll qualify for a better interest rate now that she earns more and has greater job stability. She crunches the numbers on her current loan to see how much switching to a new deal could save her:
| Interest rate | Repayments | Time left on loan | Balance after one year | Refinanced loan term | Refinanced rate | New monthly repayment | Total interest | Total saving |
|---|---|---|---|---|---|---|---|---|
| 12.50% p.a. | $337 | 4 years | $12,696 | N/A | N/A | $337 | $5,248 | N/A |
| 12.50% p.a. | $337 | 4 years | $12,696 | 2 years | 10.00% p.a. | $586 | $3,111 | $2,138 |
| Calculations are for illustrative purposes only and don't necessarily reflect the interest rate you'll receive on your car loan. | ||||||||
Because she qualifies for a very decent rate discount based on her new job, as well as having covered the first 12 months of the loan without issue, Harriet stands to save well over $2,100 by paying the final four years of her loan over two years.
The other factor to consider is that Harriet’s lender charges an early termination fee of $750 for loans paid out in the first two years of their term, reducing her savings to $1,388. Still, that’s enough for her to bite the bullet and switch to a new loan.
Pros and cons of health insurance
Pros
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You could save money
Switching to a lower interest rate or lower fees can reduce your overall borrowing costs, especially if your credit position has improved since you took out your original loan.
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Adjust your repayments to suit your budget
Refinancing lets you shorten your term to pay off your car sooner or extend it to free up some breathing room in your monthly budget.
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Access features your current loan doesn't offer
If your existing lender doesn't offer things like additional repayments, a redraw facility or a residual payment option, refinancing gives you the chance to switch to a loan that does.
Cons
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You may be charged fees to switch
Early repayment and new establishment fees will eat into, and in some cases cancel out, the savings you'd otherwise enjoy.
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Extending your term can cost you more overall
Lower monthly repayments from a longer term will mean paying more in total interest over the life of the loan.
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Lower interest rates aren’t guaranteed
If interest rates have gone up across the board, your financial situation has changed or you’ve had trouble repaying your loan, you may not be offered a lower rate.
How to refinance your car loan with Savvy
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Submit your application online
Tell us about yourself, including your financial situation, how much you need to borrow and your proposed new loan term.
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Send through your documents
We’ll need to verify your identity and finances, which can be done online via our simple portal.
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Have a chat to your Savvy broker
Your Savvy broker will give you a call to discuss the best options available to you and what the next steps may be.
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Have your application prepped and submitted
Once you give us the all-clear, your broker will put together your application to submit to your lender.
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Receive formal approval
If your lender is satisfied with the application, they’ll formally approve it, which your broker will keep you updated on.
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Settle your new loan and pay out your old one
We’ll handle the settlement of the loan, so all you’ll need to do is sign your contracts and the funds can be sent to your previous lender.
Why apply for a car loan with Savvy?
When refinancing your car loan may not be the best option
Refinancing isn't always the right move, even if a new deal looks appealing on the surface. If you have the option to hold off, it may be better to do so if:
- You're close to paying off your loan: if your balance is low and you have only a few months of repayments left, the fees involved in switching may not be worth it, however good the new rate looks.
- Your car is in negative equity: negative equity is when your loan balance is higher than your car's current market value. New cars can depreciate quickly, losing up to 30% in the first year and 15% to 25% over the next few years on average. A new lender typically won’t be willing to refinance the full amount. This means you’ll end up paying the difference out of pocket.
- Break fees would outweigh your savings: some lenders charge a fee for paying out your loan early. If that fee is close to or higher than what you'd save by switching, refinancing may not be worth the hassle.
- Your financial position has weakened: if your income has dropped, your expenses have increased or you've missed repayments, you're likely to be offered a lesser rate than the one you already have.
If any of these sound like your situation, you can submit an enquiry with Savvy and one of our brokers can discuss your individual situation with you.
