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How to refinance your car loan and get a better rate

Want to get a better deal on your car loan? Consider refinancing.

Car loan refinancing can help save you money, by giving you a lower rate, fewer fees and more flexibility.

Find out if refinancing is right for you and compare your options now.

Car loans you can use to refinance

Name Product Interest Rate (p.a.) Min. Loan Amount Max. Loan Amount Loan Term Establishment Fee
Simplify Secured Car Loan
6.25% - 12.50%
12 - 60 months
$100 - $500
Eligibility: Must be 18+, a New Zealand resident or permanent citizen and have an income of at least $500 per month.
See how much you could borrow without affecting your credit score.
MTF Finance Secured Car Loan
8.70% - 20.70%
3 to 60 months
Eligibility: Must be 18+, be an NZ citizen, resident or have a work visa, and have a regular source of income.
Secured car loans from $2,000.
FROM 6.99%
The Co-operative Bank Unsecured Personal Loan
6.99% - 19.99%
6 months to 5 years
Eligibility: Be 18+, an NZ citizen/permanent resident, or have a valid work visa.
Floating-rate, unsecured personal loans from $3,000.
Kiwi Car Loans Secured Loan
6.95% - 19.95%
1 to 7 years
$195 - $995 depending on lender
Eligibility: Be 18+, an NZ citizen, permanent resident or have a work visa, and have an income of least $500 per week.
100% online secured car loans from $5,000
Lending Crowd Secured Car Loan
5.03% - 15.44%
3 or 5 years
$200 - $500 depending on the amount borrowed
Eligibility: Be a NZ resident/citizen and have a good credit score.
Borrow $5,050 to $200,000 for your chosen vehicle. 100% online with no paperwork or early repayment fees.
CarFinance2U Car Loan
8.95% - 23.95%
1 - 5 years
Eligibility: Be at least 21 years old, have a valid NZ driver's licence and be an NZ citizen or permanent resident.
With a CarFinance2U secured or unsecured car loan you could get pre-approval for your next car in 30 minutes.

Compare up to 4 providers

What is car refinancing?

Car loan refinancing is switching from your current loan to another one. If you’re unhappy with your existing car loan, consider changing to one that gives you more benefits. Benefits can include: a lower interest rate, fewer fees and flexible repayment options to help you pay it off sooner or at a lesser cost.

Once approved for a new loan, you can use it to pay off your existing one and then continue to make repayments on the new loan. If done correctly, refinancing your car loan can potentially save you hundreds, if not thousands, of dollars.

You can either look for a new refinancing loan yourself or enlist the services of a finance broker, who works on your behalf to get the best option.

Car loan refinancing example

You took out a car loan of $20,000 with an interest rate of 12%. You have already paid $5,000 off the loan, leaving you with $15,000 left to pay.

You decide to refinance your loan with another lender offering an interest rate of 8%. You apply for a $15,000 loan with the new lender and use the funds to pay off the remaining amount on your original loan.

You then continue to make repayments on the new loan, but are now paying 8% interest, instead of 12%, saving money in the process.

Pros of car refinancing and why it’s a good idea

If you’re still sitting on the fence about whether refinancing your car loan is a good idea, here are a few benefits to consider:

  • Lower interest rate. One of the main advantages of refinancing is securing a lower interest rate. As with any loan, interest payments typically account for the highest cost. Keep an eye out for a car loan with a lower interest rate than you’re currently paying. Interest rates tend to fluctuate, so you need to refinance at the right time to get the lowest rate.
  • Lower repayments. A new loan with lower rates and fees means your repayments will be smaller. You can also lower your repayments by extending your loan term when you refinance. Adding additional years onto your car loan lowers your payments and frees up much-needed cash.
  • Makes the balloon payment more manageable. If you are currently paying off dealer finance, it’s likely you’ll have a balloon payment to cover when the loan ends. Refinancing allows you to pay off your balloon payment over an extended period if you can’t repay the final lump sum.
  • Change lenders. If you’re unhappy with your current lender or would prefer a different one, refinancing allows you to choose a new loan provider.
  • Get more features from your car loan. Refinancing your car loan can also give you additional features that you don’t currently have. Features can include the ability to make extra repayments or pay your loan off early without an early repayment fee.

Cons of car refinancing and why it might not work for you

There are also a few downsides to car refinancing, so you need to factor these into your decision:

  • Potential to pay more interest over the term of the loan. Even if you refinance with a lower interest rate, you may end up paying more in interest if you extend the loan term. You should calculate how much you will pay over a longer term before deciding if it’s right for you.
  • Exit and set-up costs. Switching from your current car loan may incur exit costs. You may also be liable for set-up charges with your new car loan. These are both additional costs and cons that you need to consider.

Refinance your car loan in 6 steps

  1. Check whether the lender charges a fee for closing your loan before the end of the term. If it does, make sure you factor this in when working out if refinancing saves you money.
  2. If you want to proceed with refinancing, you need to compare your options. Make sure you meet the eligibility criteria and are aware of all fees and charges. Once you find the right loan, click “Go to Site” to apply.
  3. Select “refinancing” as the loan purpose.
  4. Submit the relevant documents and information. You usually need to include information about the lender you’re with and details about your car.
  5. Pay off your previous loan. Your new lender may do this for you, or you may need to organise this yourself.
  6. Close your previous loan. Once you pay off the old loan, you should also ensure your previous lender closes the account.

Main points to consider when refinancing

  • Are your repayments less? It is essential that you check this detail. Less interest does not always mean lower payments, so remember to take this into account upfront. Don’t forget to include any ongoing fees.
  • You don’t pay more interest over the loan term. If you extend the loan term, you may end up paying more in interest throughout the loan, despite lower repayment amounts.
  • The loan has the features that you want. If you wish to make extra repayments, such as repaying the loan early, make sure the new lender offers this.
  • The lender is legitimate. Many lenders operate in the car finance space, and it is your responsibility to choose one that is reputable. See how transparent the lender is with rates and fees, and check independent reviews before deciding on a new loan.

How to find the best car refinance loan

If you decide to refinance, bear the following in mind when comparing loans:

  • Interest rate. Make sure you compare the interest rate across all the car loans available to you. The lower the interest rate, the better, so try and find a loan that will help save you money.
  • Flexibility in repayments. Flexibility in repayments is a significant comparison point. Can you make weekly, fortnightly or monthly payments? It’s also essential to check if the car loan allows you to make additional repayments so that you can pay off your car loan quicker. If repayment flexibility is vital to you, ensure the lender offers the options you need.
  • Additional fees. Most refinancing loans have fees you may be liable to pay. Understand all the costs you may have to pay both upfront and over time. Look for a refinancing option with the least fees to help you save money throughout the loan term.
  • Maximum loan amount. Each refinancing option may have different maximum loan amounts that you can borrow. If you have a specific figure in mind, look for a loan that allows you to borrow this amount.

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