Refinancing my Car Finance

Rates from 8.9% APR. Representative APR 19.9%

6 Features about Refinancing your Car

What does Refinancing a Car Mean?

Refinancing a car means paying the outstanding amount on an existing car finance loan with a new one, typically from a different provider.

Suppose you’re stuck with existing car finance and unhappy with it. You might want to refinance your car loan. You can use a new finance agreement to repay the current finance.

Refinancing your car can pay off the existing HP or PCP car loan with a single payment. As we all know, life is constantly changing. Committing to a three to five-year car loan may prove to be an expensive decision, as you might end up locked into a less favourable interest rate.

If you’re tight on cash, you may wish to refinance and spread the cost for a longer term than what’s left on your original car loan, meaning you could make lower monthly repayments. (but more overall with interest).

We work with an expert panel of lenders who can find you a better deal than your current car finance.

Why might you Refinance a Car?

Here are some of the main reasons you might want to consider refinancing a car loan:

Get a Lower Interest Rate

Suppose you financed a car a couple of years ago and have made all your repayments on time. You may find that your credit score has improved significantly! You could be eligible for a lower interest rate. If you refinance your car with a better interest rate, you might pay less over the term of your new agreement.

Reduce Your Monthly Repayments

With the increasing cost of living, you may find that your monthly car loan payment is consuming too much of your paycheck. You might consider taking out a refinancing loan if that’s the case.

By refinancing your car, you could opt for a new car finance agreement with lower monthly payments. Extended the period: allows you to pay significantly less per month. The downside of this, of course, is that the additional interest added over that time will probably be you’re paying more overall.

Can I Refinance at the End of a PCP

One of the most popular types of car finance, a Personal Contract Purchase deal, offers you a chance to own the vehicle by paying a hefty fee (a balloon payment) at the end of a PCP. You must return the car to the dealer if you don’t want to pay. Can I refinance a balloon payment?

Suppose you opt for a car refinance deal at the end of a PCP; you can split the balloon payment into monthly instalments. Naturally, this will extend the overall financing period, meaning a higher cost in the long term due to accruing interest.

Should I Refinance my Car?

If your circumstances are much the same as when you started your car finance, a refinancing deal might not be worth the effort. But if things have changed, it can be an excellent way to optimise your finances.

As costs increase (and salaries freeze), you may need to reduce your monthly outgoings. By refinancing your car, you can take out a new deal with a longer-term – meaning lower monthly repayments and more disposable income per month.

Remember that this might not be the best overall financial strategy, as you might pay more interest. However, it’s a good option if you need to reduce your monthly outgoings.

Even if you’re not struggling monthly, you might want to consider refinancing. Interest rates constantly fluctuate, and the deal you locked into might be worse than what’s available now.

If your credit rating has improved since you first took out the deal, you might be able to find a new loan with a lower rate of interest – you’d be paying less overall.

If you’re at the end of a PCP agreement, you might want to pay the balloon payment to keep the car. However, this is usually a few thousand pounds and may be challenging to pay off in one go. If you take out a refinancing loan, you can split the cost over a new agreement term for affordable monthly repayments. However, due to an extended financial period, this may result in paying more overall.

Can you Refinance a Car at the End of a PCP Balloon Finance Agreement?

One of the main benefits of the PCP agreement is that you have a few options. The most common one is to hand the car back to the dealer and take out a new PCP deal on a newer car. You can also choose to hand the car back and walk away.

Another option at the end of a PCP is to pay a balloon lump sum to pay off the car and become the owner. This sum is usually made up of the car’s current value and is usually a few thousand pounds.

By refinancing, you don’t need to worry about coughing up a few thousand upfront for the balloon payment. You can take out a loan to break the cost into manageable chunks.

Of course, you will end up paying interest, whereas you wouldn’t if you paid the balloon payment lump sum without financing.

Can you Refinance a Car Early?

You might think you must wait until the end of your contract term to refinance. However, that’s not true! You can take out a new policy and settle what you owe for the current arrangement.

You can find a deal with lower monthly repayments (as it’s over a longer term than what’s left on your initial car finance deal).

If you want to pay as little as possible on interest, you could find a new finance agreement with a lower APR, meaning you spend less overall on your car.

Many finance providers offer car refinance. It’s a super simple process. After you’re approved, your new lender will pay off the existing car finance. And you’ll begin paying the lower monthly payments to the latest finance agreement.

Refinancing a Car that’s Under Five Years Old

If your car is less than five years old, you can refinance onto a PCP agreement.

The advantage of a PCP deal is that your monthly payments will be much lower than with a Hire Purchase or bank loan.

You also have the advantage of three different options at the end. You can:

  1. Return the car to the lender, and walk away.
  2. Return the vehicle to the lender, and opt for a new PCP car finance deal.
  3. You could pay the balloon payment and own the vehicle outright.

Refinancing a Car that’s More than Five Years Old

If you have an older car, you’ll need to consider a Hire Purchase or bank loan to refinance. Because setting a PCP balloon payment is tricky to calculate on older cars!

Instead of a PCP, you might want to consider a Hire Purchase deal. A Hire Purchase has fewer options than a PCP but is significantly more straightforward.

Essentially, you ‘hire’ the car until your final repayment. After that, you own it outright. Your monthly payments will be higher than with PCP because you’re paying off the car’s total value.

Even if you refinance to a Hire Purchase deal from a PCP, you’ll likely be paying a lower monthly repayment. That’s because of the depreciation of the car.

Can you Refinance a Car with Bad Credit?

You can refinance on a car with bad credit; working with a large panel of lenders means we can find the right car refinancing deal for you, no matter your circumstances.

Not confident in your credit score? Don’t worry – we work with many lenders specialising in offering credit to those with a low credit rating.

Can you Refinance a car that has Negative Equity?

Suppose your car has depreciated quicker than expected. In that case, you may even owe more money than the car is worth, known as negative equity. If you find yourself in this position, we can look for a lender who can offer you the total amount you have less to pay: not just what the car is worth.

Can I Refinance my Car Here?

You’re in luck if you’re interested in refinancing a car to reduce your monthly repayments, pay less interest, or pay off a balloon payment.

Take out a quote, and if you get approval in principle, we’ll have an account manager call you to advise on your options and answer any questions. There’s no risk involved – there is no commitment yet!

FAQs - Refinancing a Car

Can you refinance a car on finance?
Yes, most of our finance providers can offer a car refinancing deal. Of course, each lender will likely give you a different quote. You’ll find that other lenders offer differing APR interest rates.
Is it cheaper to refinance a car?
Suppose you’re looking to reduce your monthly repayments. If you want to pay as little as possible, you can opt for a refinancing deal with a lower interest rate than what you’re on.
How many times can you refinance a car?
If a lender approves your application, you can refinance your car. Of course, ensure you don’t apply too often in a short time, as this can damage your credit rating. We recommend waiting until you’ve passed the halfway point of your initial finance term before refinancing a car.

Rates from 8.9% APR: the exact rate you will be offered will be based on your circumstances, subject to status.

Representative example: borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed), and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37.

We look to find the best rate from our panel of lenders and offer you the best deal you’re eligible for. We don’t charge a fee for our service, but we earn a commission. This does not influence the interest rate you’re offered in any way.

Autedia Limited is a credit broker and not a lender, authorised and regulated by the Financial Conduct Authority (Firm Reference Number: 948436). You can check the authorisation on the FCA Financial Services Register.