To refinance a car loan, get a written payout quote from your current lender and compare the full cost of keeping that loan with the new offer. If the new loan still wins, the new financier pays out the old loan and the old lender releases its security over the car. A lower monthly repayment can still cost more when the new term runs longer than the time left on the old loan.
Can You Refinance Your Car Loan?
Yes, you can refinance a car loan when you, the car and the amount you owe all meet the new financier’s criteria. Moneysmart’s refinancing guide describes refinancing as replacing an existing loan with a new one, either with the same lender or a different lender. The new loan pays out the old debt, so the new financier assesses you as a fresh applicant and the car as fresh security.
These problems most often stop a car refinance:
- Negative equity. You owe more than the new financier will lend against the car. You then pay the difference at settlement or keep the existing loan.
- The car’s age or condition. St.George accepts a car 7 years old or less at application that has never been written off. RACV’s used car loans accept vehicles up to 20 years old at the start of the term.
- A car that can’t be offered as security. CommBank’s secured car loan requires the security car to be “not currently under finance”, so a CommBank refinance of a financed car would be an unsecured loan.
- Repayment problems. Missed or late payments on the current loan weaken the application, because a lender can’t lend if it thinks you can’t make the repayments.
- A loan purpose the financier won’t accept. St.George’s car loan is for a car in personal use. A car used mainly in a business is assessed as business vehicle finance instead.
Get a Current Payout and Compare the Whole Term
Ask your current financier for a written payout quote before you apply anywhere else. The quote shows the amount needed to close the loan on a nominated day and the day it stops being valid. Check that it includes accrued interest, any early termination fee and any balloon or residual amount still owing.
Exit fees differ by lender. RACV charges a $325 early termination fee unless the loan is paid out in the last 6 months of the term. At RAC, paying out a loan in the first 24 months costs $499. St.George charges $150 to repay in full within the first 12 months and $100 after that. ANZ tells existing secured car loan customers that early repayment charges apply and that an accurate payout figure must be calculated first.
A balloon is a lump sum due at the end of the term. RACV notes that you still owe it with interest. A refinance that replaces a balloon must cover that lump sum in the new loan amount, so the new financier assesses the full balance.
Compare the loans over the same period. Use each loan’s rate, fees and term. Add the exit fee and the new establishment fee to the refinance side. Moneysmart warns that refinancing can cost more when the rate or fees are higher or when you take longer to pay off the loan.
Hypothetical Refinance Comparison
This hypothetical example assumes $18,000 owing at 11.0% p.a. with 36 months left. The new loan adds a $300 exit fee and a $400 establishment fee, and none of the loans charges monthly fees.
| Option | Amount financed | Rate | Term | Monthly repayment | Cost over the next 36 months |
|---|---|---|---|---|---|
| Keep the existing loan | $18,000 | 11.0% p.a. | 36 months left | $589 | $21,215 |
| Refinance over the same term | $18,700 | 7.5% p.a. | 36 months | $582 | $20,941 |
| Refinance over a longer term | $18,700 | 7.5% p.a. | 60 months | $375 | $21,817, including $8,327 still owed |
The same-term refinance saves $274 over three years, even though the repayment falls by only $7 a month. The 60-month refinance cuts the repayment by $214 a month. After three years, though, you have paid $13,490 and still owe $8,327. Across all 60 months it costs $22,483, which is $1,268 more than keeping the existing loan.
Prepare the Borrower and Vehicle File
Collect the evidence before you lodge one application with the financier you have chosen. The new financier checks your income, spending and other debts, so a complete file avoids repeat requests and delays.
- Income evidence, such as recent payslips or tax returns if you’re self-employed
- Living expenses and every other debt, including credit cards and buy now pay later accounts
- Statements for the current car loan that show the amount owing and your repayment history
- The written payout quote from the current financier
- The car’s registration papers in your name
- The car’s VIN (vehicle identification number) or chassis number, make, model and year
- Comprehensive insurance details, because St.George requires the insurer to show St.George as the financier
Adverse credit changes how hard the financier looks at your file. Expect questions about each default or late payment, and give evidence that the cause has been resolved, such as a paid default or a period of on-time repayments. A lender with a wide rate range prices each application on its assessment. CommBank’s unsecured personal loan rates, for example, run from 6.99% to 23.99% p.a.
Several applications in a short time make the position worse. Moneysmart’s loan rejection guide says each application is recorded on your credit report and too many can lower your credit score. Check your credit report for mistakes before you apply. Then match your circumstances to one financier’s published criteria. RAC, for example, requires applicants to be free from bankruptcy for the past five years and not on a debt agreement.
Check Security and Obtain the New Approval
A secured financier searches the Personal Property Securities Register (PPSR) before it lends against the car. The search uses the car’s VIN or chassis number, not its number plate. Before settlement, the result should show one registration, held by your current financier.
Resolve any other result before settlement:
- An unexpected secured party. Contact that party and ask why it holds a registration over the car. Settlement waits until it confirms the debt is paid and removes the registration.
- Vehicle details that don’t match the car. PPSR treats a mismatch as a reason for caution, because it can mean the VIN or chassis number was altered. Recheck the number on the car and on the registration papers.
- A written-off or stolen record. St.George, for example, won’t lend against a car that has ever been written off.
The new financier then registers its own security interest. St.George charges a $6 PPSR fee for this and RAC charges $8.
Read the formal approval before you sign. Check the amount financed, rate, comparison rate, term, fees and repayment against the quote you compared. Confirm the payout instructions with the broker or financier: the old lender’s name and account, the payout amount and the settlement day inside the quote’s validity.
Agree on any gap before settlement. If the payout is higher than the approved amount, you pay the shortfall to the old lender so the loan closes in full. If the old loan closes for less than the amount sent, ask the old lender how it returns the excess.
Settle the Refinance and Verify Closure
The broker and the new financier hand the refinance over in this order:
- The broker sends the signed contract and the current payout quote to the new financier.
- The new financier pays the payout amount to the old lender on the settlement day.
- The old lender closes the loan account and confirms in writing that the balance is nil.
- The old lender ends its PPSR registration over the car.
- The new financier sets up the repayment account and the first repayment.
- You cancel any direct debit or scheduled payment to the old loan once its closure is confirmed.
Check each result before you treat the refinance as finished. Search the PPSR again and confirm that only the new financier’s registration remains. Compare the first repayment date and amount with the new contract. Keep the payout quote, closure letter, both PPSR search certificates and the signed contract together.
The broker follows up the old lender if the closure letter doesn’t arrive or a balance remains. A small remaining balance can come from interest charged after the quote was issued. Pay it and ask for an updated closure letter.
If the old lender’s registration stays on the PPSR, you can send it an amendment demand. PPSR’s guidance for secured parties says the Registrar can get involved when the registration isn’t ended within five business days of the demand.
Resolve a Refinance That Does Not Stack Up
Most stalled refinances come from one of three problems. Each has a document to recheck and a party who fixes it.
Refinance Problems and Who Fixes Them
| Problem | Evidence to recheck | Who to contact |
|---|---|---|
| The payout quote expired before settlement | The quote’s validity date against the settlement day | The old lender, for a new quote, which the broker sends to the new financier |
| The shortfall is unaffordable | The payout figure against the approved amount and the car’s value | The broker, to ask whether a smaller fee or different loan amount is possible before you withdraw |
| The old security wasn’t released | A new PPSR search showing the old registration | The old lender first, then an amendment demand through the PPSR |
A caravan refinance follows the same payout, security and closure steps, but its eligibility differs. Car loan criteria, such as St.George’s 7-year age limit, are written for cars. A caravan is assessed under the financier’s caravan criteria, which our guide to caravan loans covers. If you haven’t chosen the next vehicle yet, a pre approval for a car loan is a different process from refinancing the one you own.
A decline or an uneconomic offer can mean the existing loan is the better choice. Keep it when the written payout and new contract show no saving over the same period, or when the only saving comes from a longer term. After a decline, Moneysmart suggests you give yourself time to improve your situation before you apply again.
Compare Car Refinance Options
The best car loan refinance depends on what you need to change: the rate, the repayment, the car’s eligibility or whether the car is security. Each provider below suits a different objective, and none is right for every borrower.
- St.George suits a car 7 years old or less, refinanced from St.George or another lender. It needs a statement of the amount you still owe, and its car loan has no balloon.
- RACV suits an older used car. Its used car loans accept vehicles up to 20 years old at the start of the term, and RACV refinances car loans from other providers when you meet its criteria.
- RAC suits a borrower who lives in Western Australia, because WA residence is part of its criteria. Its secured rates are higher on smaller loans.
- CommBank suits a refinance that doesn’t use the car as security. Its secured car loan won’t take a car currently under finance, so a refinance would use an unsecured personal loan, which can refinance existing debts.
- ANZ no longer offers secured car loans to new customers. Its route is an unsecured personal loan, which doesn’t use the car as security.
None of these routes moves the car loan into a home loan. That is home-loan refinancing, a different product with its own costs, which our guide to how you refinance a home loan explains.
Published Car Refinance Terms by Provider
| Provider | Route for an existing car loan | Published rates | Fees | Limits |
|---|---|---|---|---|
| St.George | Secured car loan | 6.49% to 12.99% p.a. fixed (comparison rate 7.90% to 14.34% p.a.) | $250 establishment, $15 a month, $6 PPSR, $150 or $100 early repayment | Car 7 years old or less, never written off, personal use, $10,000 to $130,000 over 1 to 7 years |
| RACV | Secured car loan | Used car from 7.99% p.a. (comparison rate 8.57% p.a.) | $499 application, $325 early termination, no ongoing fees | Vehicle up to 20 years old at the start of the term, from $5,000, up to 7 years |
| RAC | Secured car loan | 7.70% p.a. fixed for $70,000 and over to 10.95% p.a. for $8,000 to $29,999 (comparison rate from 8.42% p.a.) | $499 establishment, $8 PPSR, $499 early termination in the first 24 months | WA residents, from $8,000, 3 to 7 years |
| CommBank | Unsecured personal loan | 6.99% to 23.99% p.a. (comparison rate 8.04% to 24.85% p.a.) | $15 a month | Its secured car loan excludes a car currently under finance |
| ANZ | Unsecured personal loan | Quoted on application | $150 approval fee, $10 a month, early repayment charges on fixed-rate loans | No secured car loans for new customers |
Each comparison rate uses its lender’s own example loan. RACV’s, for example, is based on a $30,000 secured loan over 5 years. Moneysmart’s car loan guide says to compare comparison rates only for the same loan amount and term. Ask each shortlisted financier for a written quote on your payout amount and remaining term, then compare total repayments and fees the same way as the hypothetical example.
Staying with the same lender is a different route from a new loan. To negotiate, ask your current lender whether it will change the rate or term on the existing contract. Accept the change only when the lender confirms the new rate, term and repayment in writing. A replacement loan with the same lender still needs a new contract and a written payout of the old loan, followed by closure confirmation.
Choose the refinance when its written quote beats keeping the loan over the same period, after the exit fee and new fees. If it doesn’t, keep the existing loan and test the next offer the same way.
