Personal Car LoanNew Year, New Car Loan?

New Year, New Car Loan?

January 31, 2022

Striding confidently into 2022, you may be considering changes you’d like to make to ensure this year is better than the last – which, given the general vibe of 2021, shouldn’t be that hard.

So then, let’s talk car loans and how you can change yours for the better.

If you have a car loan currently, you may be able to get a better deal by refinancing. In this post, we’ll look at what it means to refinance a car loan – and the various reasons why you might want to do so.

Why Refinance?

Here are some of the main reasons why you may choose to refinance your car loan in 2022.

Get a Lower Rate

Depending on your situation when you first applied for your car loan, you may find you can now get a lower rate on a new loan than the rate you were approved for on your old loan. Refinancing may be of benefit to you if:

• Interest rates have fallen since you applied for your loan.
• Your credit score has increased since you applied for your loan.
• You didn’t compare loan options properly before you settled on your car loan.
• You failed to compare the market and took out finance with the dealer when you purchased your car.

By refinancing to a car loan with a lower rate, you could enjoy a lower repayment amount, while paying less in interest overall.

Pay Less in Fees

Some lenders charge more in fees than others. If you are paying too much in fees on your car loan, you could see significant savings by refinancing to a loan with low or no fees.

Note: Some lenders charge fees to exit their loans early, while some charge fees to establish loans. You should take those costs into consideration when deciding whether refinancing is right for you.

Enjoy More Flexibility

Car loans are not one-size-fits-all. As such, some are more flexible than others. If you want more flexibility on your loan, this might be a good time to compare your options and refinance.

Generally, car loans that offer more features – such as the ability to repay more on the loan, or redraw extra amounts paid in – come at a higher cost. However, you may find that you save on interest by paying off your loan sooner when you choose a loan that allows for this kind of flexibility.

Fit your Budget

When you refinance your car loan, you can choose a repayment schedule that better fits your budget. If your credit score has increased – or interest rates on loans have fallen – you may now find a loan with a lower rate, which in turn offers lower repayments.

Even if that’s not the case, you may be able to refinance your loan over a longer term to enjoy lower repayments month to month. While this will likely mean you pay more in interest overall (and spend a longer period in debt), you may find the new repayment schedule fits more comfortably within your budget, making it easier to live with.

Case Study

Carlee applies for a $25,000 car loan with an interest rate of 11% p.a. Paid off over a period of five years, her loan’s repayments are $544 per month, at a cost of $7,614 in interest overall.

After paying off $8,000 in the first year or so, Carlee checks out her refinance options.

If she sticks with her current loan, she would pay around $4,090 in interest throughout the remaining term, while paying out $544 each month on her repayments

Alternatively, she could refinance to a four year loan to cover the remaining $17,000, at a lower rate of 7% p.a. Doing this, she would pay monthly repayments of $407, and an overall interest cost of $2,540.

By refinancing, that would allow Carlee to pay $137 less each month, while saving around $1,550 in interest on the remaining amount owed.

Note: This example has not taken into consideration any establishment, ongoing or break fees, which could affect the savings Carlee may enjoy when refinancing.

Want to refinance your car loan?

To find out more about refinancing your car loan, drop us a line to see how we could help!


  • Roland is the founder of Credit World Pty Ltd and a leading financial expert in Australia. He has extensive knowledge on car loans in Australia. Known as a car loan expert, Roland has been featured on TV and in various publications. He started in finance comparison in 2005. Now a 17 year industry veteran.