Refinancing a motor vehicle loan can simplify loan repayments, make them more manageable, and offer a more favourable set of loan terms.

Throughout the term of a motor vehicle loan, the personal and financial circumstances can change, resulting in a change in the ability to make loan repayments. In such cases, borrowers may benefit from refinancing their current motor vehicle loan to a new one (often from a different lender) that is better suited to their new financial situation or goals.

Refinancing a motor vehicle loan can come with benefits like: 

  • Lower interest rates – the new loan can offer a lower interest rate that allows borrowers to save money over the term of the loan.
  • Adjusted repayment amounts – the new loan can have more manageable loan repayments, making it more achievable for borrowers.
  • Consolidate debt – refinancing to a new loan can help to collate other debt amounts under a single loan.

However, refinancing a loan can also come with additional fees and costs that borrowers should consider before choosing to make the switch. Lenders for the new loan may also have higher credit requirements for refinancing, which may present a higher barrier for borrowers.

When should I refinance my motor vehicle loan?

Refinancing to a new motor vehicle loan is usually best done in response or anticipation of a significant change in your ability to repay the current loan — depending on what your financial circumstances look like, the option to refinance a loan can end up being a beneficial financial strategy.

The key is to determine if the act of refinancing will be ultimately beneficial, whether it’s more relaxed repayment terms or amounts, potential cost savings, or to pay off a loan faster. Borrowers should compare the existing and new loan terms against their current financial situations to get a full picture before making a decision.

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