Refinance a Car Loan? Here's How to Save Big (2026)

Refinancing a car loan can seem like a daunting task, especially if you're not sure where to start. Perhaps your current loan isn't working for you anymore, or maybe you're just looking to save some money on monthly repayments. Whatever your reason, understanding the ins and outs of car loan refinancing can empower you to make informed decisions that align with your financial goals.

Understanding Car Loan Refinancing

Car loan refinancing involves replacing your existing car loan with a new one, usually to secure a lower interest rate, change the loan term, or alter monthly repayment amounts. This can be beneficial if interest rates have dropped since you took out your original loan, your credit score has improved, or your financial situation has changed.

In Australia, refinancing a car loan is a popular option for many borrowers. With over 83 lenders available through companies like Esteb and Co, you have a wide range of choices to find a loan that better suits your current needs. By refinancing, you may be able to lower your interest rate, reduce your monthly payments, or pay off your loan faster.

Current Car Loan Refinancing Rates and Options

As of 2026, car loan interest rates in Australia generally range from 6.49% to 12%, depending on factors such as your credit score, the age of the vehicle, and the loan term. It's crucial to compare rates from multiple lenders to find the best deal available to you.

Below is a comparison table to help you understand the different options available:

When considering refinancing, take into account any fees associated with exiting your current loan and setting up a new one. Also, consider the total cost of the loan over its life, not just the monthly repayment amount.

Steps to Refinance Your Car Loan

Refinancing your car loan can be a straightforward process if you follow these steps:

1. Evaluate Your Current Loan: Review the terms of your existing loan, including the interest rate, remaining balance, and any fees associated with early repayment.
2. Check Your Credit Score: A higher credit score can help you secure a lower interest rate. Obtain a copy of your credit report to ensure it’s accurate and reflects your current financial position.
3. Research Lenders: Use Esteb and Co’s access to over 83 lenders to compare rates and terms. Look for a loan that offers better terms than your current one.
4. Calculate Potential Savings: Use an online car loan calculator to determine how much you could save by refinancing your loan. Consider both monthly savings and total savings over the life of the loan.
5. Apply for Pre-Approval: Reach out to your chosen lender to apply for pre-approval. This step can give you an idea of the rates and terms you qualify for without committing to a new loan.
6. Complete the Application Process: Once pre-approved, submit a formal application. Be prepared to provide documentation such as proof of income, identification, and information about your vehicle.
7. Review the New Loan Agreement: Carefully review the terms of your new loan before signing. Ensure you understand all fees, repayment terms, and conditions.
8. Pay Off the Old Loan: Once your new loan is approved, use the funds to pay off your existing car loan.

Tips and Considerations for Refinancing

Refinancing your car loan is a significant financial decision. Here are some expert tips to consider:

• Timing: Consider refinancing when interest rates are lower, or your credit score has significantly improved.
• Loan Terms: Extending your loan term can lower your monthly payments but may increase the total interest paid over time.
• Fees and Costs: Be aware of any fees for early repayment of your current loan and setup fees for the new loan. Calculate if the savings outweigh these costs.
• Review Your Finances: Ensure that the new loan aligns with your overall financial goals and budget.
• Consider Loan Features: Some loans offer features such as additional repayments or redraw facilities, which can provide flexibility.

Frequently Asked Questions

1. Can I refinance a car loan with bad credit? Yes, but it may be more challenging to secure a lower interest rate. Improving your credit score before applying can increase your chances of getting a better rate.

2. How often can I refinance my car loan? Technically, there is no limit to how often you can refinance, but frequent refinancing can lead to additional fees and may negatively impact your credit score.

3. Will refinancing affect my credit score? Applying for a new loan will result in a hard inquiry on your credit report, which may temporarily lower your score. However, consistent, on-time payments on your new loan can improve your score over time.

4. Can I refinance if I owe more than my car's value? It can be difficult to refinance an upside-down loan, where you owe more than the car's market value, but some lenders may offer options.

5. What documents do I need to refinance my car loan? Typically, you'll need proof of income, identification, vehicle details, and possibly your current loan statement.

6. How long does the refinancing process take? The refinancing process can take anywhere from a few days to a few weeks, depending on the lender and your specific situation.

7. Is there a minimum loan amount for refinancing? Some lenders may have a minimum loan amount requirement. It's best to check with individual lenders for their specific criteria.