Short answer: Sometimes. Refinancing can lower your rate if your credit, income or the market has improved since you took the loan out, or if your original loan was expensive to begin with, as some dealer-arranged loans are. It only saves money if the interest you save is more than the cost of paying out the old loan and setting up the new one. Stretching the term can also wipe out the gain.
When refinancing is worth a look
- Your credit history has improved, for example because old missed payments have dropped off your file or you've paid down other debts.
- Your income is higher or more stable than when you applied. Finishing probation or moving from casual to permanent both count.
- You took dealer finance or a loan with a high rate or high fees in a hurry.
- A balloon payment is coming up and you need to deal with it anyway. See refinancing a balloon payment.
It's less likely to help when there's only a year or so left on the loan, when the balance is small, or when your credit file has had new problems since you took the loan out.
Run the numbers first
Example only, with rates chosen for illustration: $25,000 left to pay over 4 years.
| Current loan at 12% p.a. | New loan at 9% p.a. | |
|---|---|---|
| Monthly repayment | about $658 | about $622 |
| Total interest saved over 4 years | about $1,740, before fees | |
Now take off the costs of switching: any early termination or payout fee on the old loan, the new loan's establishment fee, and any other charges. If those add up to most of the $1,740, refinancing isn't worth it. Compare using the comparison rate and the total cost, not just the headline rate. Moneysmart's calculators can help.
Costs to check
- Payout figure. Ask your current lender for a written payout quote. It will include any early termination fee or break costs.
- New loan fees. Establishment, account-keeping and any brokerage fees.
- Term. A longer term lowers the repayment but can raise the total interest paid. Try to keep the same end date, or an earlier one.
- Credit enquiry. A new application usually adds an enquiry to your file, which stays for five years.
More detail in early termination fees explained.
Steps to refinance
- Check your credit report and fix any errors.
- Get a payout quote from your current lender.
- Gather recent payslips or income evidence, bank statements, and the car's details (rego, VIN and kilometres).
- Compare offers on total cost, then apply with one lender at a time.
- Once approved, the new lender pays out the old loan and takes over the security on the car.
Think you're paying too much on your car loan? Tell us about your situation in about 60 seconds and a licensed broker will call you. No credit check to enquire.
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General information only. This isn't financial advice. Finance the Ride is a referral service and doesn't hold an Australian Credit Licence. Last reviewed September 2026.
