How to Refinance Your Car Loan in Australia for Better Terms

A car parked, the owner thinking about refinancing options.

If you're feeling stuck with high interest rates or monthly repayments that strain your budget, refinancing your car loan could be the solution. Car loan refinancing allows you to replace your existing loan with a new one—often with better terms, lower repayments, or a reduced interest rate.

This guide will walk you through the steps to refinance your car loan in Australia, explain when it makes sense to refinance, and highlight the benefits and potential risks to consider.


What Is Car Loan Refinancing?

Refinancing your car loan means taking out a new loan to pay off your existing car loan. The goal is to secure better terms, whether that’s a lower interest rate, reduced repayments, or a shorter loan term.

The new loan may come from the same lender or a different one, depending on where you can get the best deal.


Why Refinance Your Car Loan?

There are several reasons why refinancing might be a good financial move:

  • Lower Interest Rate – If market rates have dropped or your credit score has improved, refinancing can get you a lower rate, reducing the overall cost of your loan.

  • Lower Monthly Repayments – Refinancing can help you extend your loan term, lowering your monthly repayments to free up cash flow.

  • Pay Off Your Loan Faster – If you’re in a stronger financial position, refinancing to a shorter-term loan can help you pay off your car sooner and save on interest.

  • Switch to a Better Loan Structure – Some car loans come with high fees or inflexible terms. Refinancing gives you the chance to choose a loan with better conditions.

  • Remove a Co-Signer – If you originally needed a co-signer (e.g., a family member), refinancing in your name alone can remove their financial responsibility.


When Should You Consider Refinancing?

Good Times to Refinance:

  • Your credit score has improved, making you eligible for better rates.

  • Interest rates have dropped since you took out your original loan.

  • Your current lender’s fees are too high, and another lender offers better terms.

  • You need lower repayments to improve your cash flow.

  • You want to pay off your loan faster by switching to a shorter term.

When Refinancing May Not Be Worth It:

  • You’re near the end of your loan term – The potential savings might be too small.

  • Your current loan has high exit fees – Always check for early repayment penalties.

  • The new loan has hidden fees – Ensure the refinancing costs don’t outweigh the benefits.


How to Refinance Your Car Loan in Australia

1. Check Your Current Loan Terms

Before refinancing, review your existing loan agreement to understand:

  • Your current interest rate and repayment schedule

  • Any early repayment penalties or exit fees

  • The remaining loan balance

This will help you compare your current loan with new offers.


2. Review Your Credit Score

A higher credit score can help you qualify for lower interest rates. If your credit has improved since taking out your car loan, refinancing could save you money.

You can check your credit report for free through agencies like Equifax or Experian.

If your score isn’t great, consider making improvements, such as paying off small debts, before refinancing.


3. Compare New Loan Offers

Not all lenders offer the same refinancing terms, so shop around to find the best deal. Consider:

  • Interest Rates – A lower rate means lower total loan costs.

  • Loan Terms – Decide if you want a longer term (lower monthly repayments) or shorter term (faster payoff).

  • Fees and Charges – Check for any application fees, early exit fees, or account fees.

If your current car loan has a 10% interest rate and you refinance at 6%, you’ll save thousands over the loan term.


4. Apply for the New Loan

Once you’ve chosen a lender, the application process will typically require:

  • Proof of identity (e.g., driver’s licence, passport)

  • Proof of income (e.g., payslips, bank statements)

  • Details of your existing car loan

  • Vehicle details (e.g., make, model, VIN)

Lenders will assess your application and provide loan approval if you meet their criteria.


5. Finalise the Refinancing Process

If approved, the new lender will:

  • Pay off your existing car loan on your behalf.

  • Set up new repayment terms based on the refinanced loan.

Make sure you understand the new repayment schedule and set up automatic payments to avoid missed installments.


Pros and Cons of Refinancing a Car Loan

Pros:

  • Lower interest rates can save you money.

  • Lower repayments improve cash flow.

  • Flexibility to choose better loan terms.

  • The option to remove a co-signer from the loan.

Cons:

  • Refinancing fees could cancel out savings.

  • Extending the loan term may mean more interest over time.

  • Not all lenders offer car loan refinancing – you may need to shop around.


Should You Refinance Your Car Loan?

If you can secure a lower interest rate, reduce your repayments, or pay off your car faster, refinancing is worth considering. However, always check for hidden fees and compare offers carefully.

If you're unsure, speaking to a car loan broker can help you weigh up your options and find the best deal.


Refinance Your Car Loan with Naked Loans

Refinancing your car loan in Australia can be a smart financial move if it lowers your interest rate, reduces repayments, or helps you pay off your loan faster. Before making a decision, compare lenders, check fees, and ensure the new loan actually benefits you.

At Naked Loans, we make refinancing easy. We compare multiple lenders to find you the best refinancing deal based on your needs.

Call Naked Loans today and let’s see if we can save you money by refinancing your car loan!

Mitch Hills