How to Refinance Your Car Loan: When It Makes Sense and How to Do It
By eCarz | 22th September 2026 (updated)
Quick answer: How to Refinance Your Car Loan: When It Makes Sense and How to Do It
Refinancing a car loan means replacing your current loan with a new one, usually from a different lender. It makes sense when you can get a lower interest rate, you want to change your repayments, or your circumstances have improved, and the savings outweigh any exit and establishment fees. Compare the comparison rate and the total cost over the loan term, not just the repayment amount.
If you bought your car with a private finance car loan (for example, from a private seller), you can refinance it the same way as any other car loan. Here’s when it’s worth it, when it isn’t, and how the process works.
When should you refinance a car loan?
Refinancing is worth considering in these situations:
1. Rates have dropped, or you can now get a lower one.
If market rates have fallen since you took out your loan, or you took a higher-rate loan to get the car quickly, a lower rate can reduce both your repayments and total interest. Use the comparison rate to judge this, because it includes most fees.
2. Your Credit Score Has Improved
Lenders price loans based on risk. If your score is stronger than when you first applied (for example, you’ve cleared other debts or have a clean repayment history), you may qualify for a better rate.
3. You want lower repayments.
Extending the loan term lowers each repayment but usually increases total interest. This can help if your budget is tight, but treat it as a trade-off rather than a saving.
4. You Want to Pay Off Your Loan Sooner
If your income has gone up, a shorter term or higher repayments can cut total interest. Check first that your new lender allows extra repayments without penalty.
5. You Want to Consolidate Debt
Some people roll credit cards or personal loans into one car loan. This simplifies repayments, but the debt is then secured against your car and may take longer to clear, which can cost more overall. Run the numbers before you decide.
When refinancing might not be worth it
- Exit and fees outweigh the saving. Your current lender may charge an early termination fee, and the new lender may charge establishment and ongoing fees.
- You’re close to paying the loan off. Most interest is paid early in the term, so late-stage refinancing rarely saves much.
- You owe more than the car is worth (negative equity). Many lenders won’t refinance in this case, or will only do it on stricter terms.
- The car is too old or has high kilometres. Many lenders set vehicle age and kilometre limits.
- Extending the term only to lower repayments. You may pay more in total even though the monthly figure looks better.
How to refinance your car loan: 5 steps
Refinancing a car loan is straightforward when you follow the right steps:
Step 1: Review Your Current Loan Terms
Find your interest rate, remaining balance, remaining term and any fees. Ask your lender for a payout figure and for any early exit or discharge fees. A payout figure is only valid for a set number of days, so request an updated one before settlement.
Step 2: Assess Your Financial Position
Look at your income, expenses, other debts and credit score. Lenders will assess whether you can afford the new loan, so having recent payslips, bank statements and ID ready speeds things up. Check your credit report for errors before applying.
Step 3: Research Lenders and Loan Options
Compare the comparison rate, fees, repayment flexibility (extra repayments, redraw, fixed versus variable) and any vehicle age or kilometre limits. Compare the total cost of the loan, not only the repayment. Explore offers from multiple lenders, including specialist brokers who understand private vehicle finance.
Step 4: Apply and Get Approval
Submit your application with the new lender. Approval depends on your credit history, income and the car’s age and value. Ask for a conditional approval in writing before you commit.
Step 5: Finalise the Loan and Close the Old One
Once approved, the new lender pays out your old loan directly. Keep making repayments to your old lender until you’ve confirmed settlement. Then check that the old loan is closed and the security (the lender’s interest in the car) is removed, and keep your documents.
How much could you save? A simple way to check
Add up the total cost of your current loan (remaining repayments plus any fees). Then add up the total cost of the new loan (all repayments plus establishment, ongoing and exit fees). If the new total is lower by more than the cost of switching, refinancing is worth considering.
Should you use a car refinance broker?
A car refinance broker compares loans from multiple lenders for you and handles the paperwork. This can save time, particularly if your situation is less straightforward (for example, a self-employed income or an older vehicle). Make sure the broker holds an Australian Credit Licence or is a credit representative, and ask how they’re paid.
eCarz works with a panel of lenders and can compare options for your situation. Learn more about car refinancing with eCarz or how a car finance broker can help.
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Frequently Asked Questions.
When is the best time to refinance a car loan?
When you can get a lower comparison rate, your credit or income has improved, or you need to change your repayments, and the total savings outweigh the fees. Refinancing early in the loan term usually saves the most.
Does refinancing a car loan hurt your credit score?
Applying involves a credit enquiry, which can have a small, temporary effect. Making repayments on time on the new loan helps your record over time. Avoid making several applications in a short period.
What fees might I pay to refinance a car loan?
Common costs are an early termination or discharge fee from your current lender, and an establishment fee and ongoing account fees from the new lender. Always check these against the saving.
Can I refinance a car loan if I owe more than the car is worth?
It’s harder. Many lenders won’t lend more than the car’s value, but some may consider it with a larger deposit, extra security or different terms. A broker can tell you which options are realistic
Can I refinance a private sale car loan?
Yes. A loan used to buy a car from a private seller can be refinanced like any other secured car loan, provided the car meets the new lender’s age and condition requirements.
How long does the whole process take?
Finance pre-approval is typically completed within 24 hours. Vehicle sourcing usually takes 3–7 business days, with most clients receiving their vehicle within 1–3 weeks.
How long does it take to refinance a car loan?
It varies by lender and how quickly you supply documents. Having your payslips, statements, ID and loan details ready makes it faster.
Can I refinance to a shorter term to pay my car off sooner?
Yes. A shorter term raises your repayments but reduces total interest. Check the repayment amount fits your budget before you apply.