Car Loan Interest Rate? Gain Control & Save Big (2026)

Many Australians are exploring ways to manage their finances more effectively, and one area that frequently comes under scrutiny is the interest rate on car loans. You might have secured a car loan a few years ago, only to find that current market rates are much more favourable. So, can you change the interest rate on your car loan? Let's dive in and explore your options.

Understanding Changing Interest Rates on Car Loans

Interest rates on car loans can significantly impact the overall cost of your vehicle finance. When you first take out a car loan, the interest rate is typically fixed or variable, determining how much you'll pay in addition to the principal amount. A fixed rate remains the same throughout the loan term, while a variable rate can fluctuate based on market conditions.

Changing the interest rate on your car loan involves either refinancing the loan or modifying the terms with your existing lender. Refinancing means replacing your current loan with a new one, ideally at a lower interest rate, while a modification might involve negotiating better terms with your current lender.

Current Car Loan Interest Rates and Options in 2026

As of 2026, car loan interest rates in Australia range from approximately 6.49% to 12%, depending on factors like the lender, your credit score, the loan amount, and the term. It's important to compare offers from various lenders to find the most competitive rates.

With access to over 83 lenders, Esteb and Co can assist you in finding the best car loan rates, tailored to your financial situation and preferences.

Steps to Change Your Car Loan Interest Rate

Changing your car loan interest rate involves a series of steps to ensure you make a well-informed decision:

1. Evaluate Your Current Loan: Check your current interest rate, remaining balance, and any prepayment penalties.
2. Check Your Credit Score: A higher credit score can qualify you for better rates. Consider improving your score before applying for a new loan.
3. Research and Compare Lenders: Look for lenders offering lower interest rates. Esteb and Co can help you compare offers from over 83 lenders.
4. Calculate Potential Savings: Use an online loan calculator to estimate how much you could save by refinancing.
5. Apply for Pre-Approval: Once you've selected a lender, apply for pre-approval to understand the terms you qualify for.
6. Complete the Application Process: Submit the necessary documentation and finalise the new loan agreement.
7. Pay Off the Existing Loan: Use the new loan funds to pay off your original loan.

Expert Tips and Considerations

• Evaluate the Benefits: Ensure the savings from a lower interest rate outweigh any fees incurred during refinancing.
• Consider Loan Term: Extending your loan term can lower monthly payments but may increase the total interest paid over the life of the loan.
• Beware of Fees: Watch out for application fees, early repayment penalties, and other charges that might diminish the benefits of refinancing.
• Consult a Professional: Seek advice from a mortgage broker like Esteb and Co to understand all your options and make an informed decision.

Frequently Asked Questions

1. Can I change my car loan interest rate without refinancing? Yes, you may negotiate with your current lender for a better rate, but this is less common and may depend on your relationship with the lender.
2. How does my credit score affect my ability to refinance? A higher credit score can help you qualify for better interest rates, making refinancing more beneficial.
3. What costs are associated with refinancing a car loan? Costs may include application fees, early repayment penalties on your existing loan, and loan origination fees for the new loan.
4. Is it worth refinancing if my interest rate only drops by 1%? Even a 1% reduction can lead to significant savings over time, depending on your loan balance and term.
5. How long does the refinancing process take? Refinancing can take anywhere from a few days to several weeks, depending on the lender and your preparedness.
6. Can I refinance if I'm behind on payments? Being current on your payments is typically required for refinancing. Lenders prefer borrowers with a strong payment history.
7. Are there alternatives to refinancing for changing my interest rate? Besides refinancing, you might explore loan modification options with your current lender, although these are less common.