Car Loan Refinancing Australia: When to Switch and How Much You Could Save
For existing borrowers reviewing their current car loan and considering a better deal
Car loan refinancing means replacing your existing car loan with a new one — usually to get a lower rate, reduce repayments, or release equity. It is worth doing when the interest saving over the remaining loan term exceeds the exit and re-establishment costs. Three common situations where refinancing makes sense: your credit score has improved since the original loan, interest rates have fallen, or your current loan is no longer competitive. A finance broker compares options across 40+ lenders at no cost to you.
Three Situations Where Refinancing Is Worth Exploring:
1. Your credit score has improved
If you took out your current car loan when your credit score was lower, perhaps in the early days of a business, or after a financial setback you may have accepted a higher rate than you would qualify for today. A credit score improvement of even one band (from average to good, for example) can reduce your rate by 2 to 4 percentage points with the right lender.
2. Interest rates have fallen
When the RBA cash rate changes significantly, lenders adjust their rates. If you took out a fixed rate car loan 18 to 24 months ago and rates have since fallen, refinancing to a lower rate may save you a meaningful amount over the remaining term. Car loan rates are currently competitive it is worth reviewing any loan more than 2 years old.
3. Your current lender is simply not competitive
Sometimes the lender a broker placed you with 3 years ago was right for your situation then, but another lender is now offering significantly better terms. Lender pricing changes frequently. What was competitive when you signed is not necessarily competitive today.
How Much Could You Save? A Worked Example:
| Current loan | After refinancing | |
|---|---|---|
| Outstanding balance | $28,000 | $28,000 |
| Remaining term | 3 years | 3 years |
| Interest rate | 13.5% p.a. | 8.5% p.a. |
| Monthly repayment | $947 | $884 |
| Total interest remaining | $6,092 | $3,824 |
| Interest saving | $2,268 over the remaining term | |
Example is illustrative. Actual savings depend on your remaining balance, rate difference and loan structure.
RULE OF THUMB → Refinancing is generally worthwhile if the interest saving over the remaining loan term exceeds the combined exit and establishment costs, typically $300 to $700. On a loan with 2+ years remaining and a 3 to 5 percentage point rate reduction, refinancing almost always saves money.
What It Costs to Refinance:
Before refinancing, you need to understand the full cost of switching. These vary by lender and loan product:
Early exit fee: some fixed rate loans charge a break cost if you pay out before the end of the term. This can be significant on long-term fixed loans. Check your current loan contract.
Discharge fee: some lenders charge a fee to release the security interest on the vehicle when the loan is paid out. Typically $100 to $300.
Establishment fee on new loan: the new lender may charge an application or establishment fee. Typically $150 to $400.
Credit inquiry: refinancing creates a new credit application with a hard enquiry. This is a very minor impact, especially if it is your only enquiry in recent months.
We calculate the total cost of switching and the total saving over the remaining loan term before making any recommendation. If refinancing does not save you money after all costs, we will tell you.
The Refinancing Process Step by Step:
| Step | What happens | |
|---|---|---|
| 1 | Review current loan | Share your current rate, remaining balance and loan term. We assess whether refinancing is likely to save you money. |
| 2 | Compare lenders | We identify which lenders offer better rates for your vehicle age, credit profile and loan amount. |
| 3 | Calculate net saving | Total interest saving minus all switching costs. If positive, refinancing makes sense. |
| 4 | Application | One application to the right lender. Most car loan refinances are approved within 1-3 business days. |
| 5 | Payout and settlement | The new lender pays out the existing loan. The old lender removes their PPSR security interest. New loan commences. |
Can I Refinance If My Car Is Older or has High-Kilometres:
Yes, in most cases. As long as the vehicle still meets the lender's age threshold (typically no more than 12 years old at the end of the new loan term), refinancing is available. A higher-km or older vehicle may attract a slightly higher rate on the refinanced loan than a newer vehicle would, but if you are currently on a high rate, the saving can still be significant.
The key calculation is whether the saving over the remaining term exceeds the switching cost. We do this calculation before any application is lodged.
What Documents You Need for a Car Loan Refinance:
Current driver's licence
Vehicle registration details (make, model, year)
Current loan statement showing outstanding balance and remaining term
Proof of income: 2 most recent payslips or tax returns if self-employed
3 months of bank statements (some lenders)
Frequently Asked Questions:
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Usually not. With only 12 months remaining, the total interest saving is small and may not exceed the establishment and exit fees. The calculation changes on larger loan balances — We will model the exact numbers for your situation.
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Yes. Extending the loan term reduces monthly repayments but increases the total interest paid over the life of the loan. This is sometimes the right choice for cash flow management, but it is worth understanding the total cost trade-off. We present both options — same term with lower rate, and extended term — so you can choose what fits your situation.
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The application creates a single hard enquiry if you wish to proceed post quoting, which has a very minor short-term impact. The new loan itself, if managed well with consistent on-time repayments, builds positive credit history under Australia's Comprehensive Credit Reporting system. The net effect over 12+ months is typically neutral to positive.
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If your loan has a balloon (residual) payment due at the end of the term, refinancing can either pay it out with a new loan or restructure into a loan with no balloon. This is a common scenario and well within the scope of what we handle.
Think you are overpaying on your car loan? We can review your current rate in minutes.
Free, no credit impact. If refinancing saves you money, we will show you exactly how much.
Or call Cameron directly: 0433 858 255
