Car refinance

Generally, whether or not you should refinance a car depends on:

• How much your APR has improved by

• Your current loan details, settlement figure and balloon payment

• Any fees involved (which will vary by lender)

• How long do you plan on keeping the car

It also matters whether you’re on PCP or HP, as lenders assess each differently before offering you new terms. Switching your car loan often delivers the most value if you started with a high APR, your credit score has improved or if you’re approaching the PCP balloon payment.

Smart car refinancing tips

• Aim for at least a 2% APR reduction

• Make sure you have enough months left on your loan for savings to build

• Aim for fees under £200 - £300 in your original loan agreement, so they don’t eat up the benefit

Think of it like switching energy suppliers: the numbers have to stack up, or it’s not worth the hassle.

The best time to refinance your car is when your credit score has improved, or your current deal no longer feels like good value. You’ll also want to check that enough time is left on your loan to make the switch worthwhile, otherwise, fees might cancel out the savings.

For example:

• You have a better credit score since you took the loan

• Interest rates have fallen

• Discovering your dealer's APR was higher than average

• You’re unable to afford the PCP balloon payment

• You need lower monthly payments

Say your car loan APR was 11.55% in January 2026. If your credit score has improved since you took out a loan at a higher rate, it’s worth having a look into refinancing to unlock some savings.

You can apply to refinance your car at any time, but some lenders may require you to wait 12 months after starting your current car finance deal. If you're ready to switch now, it's worth checking your lender’s minimum term rules before jumping in.

To get your early settlement figure, just contact your current lender and ask for a written quote, which is usually valid for 28 days. This number tells you exactly how much is left to pay if you want to end your loan early, and it’s essential when comparing refinance deals.

Once you’ve made a formal written request for an early settlement quote, your lender has a legal obligation to provide it (usually within a few working days). If they refuse or delay, that’s a serious issue you’re entitled to challenge.

Under the Consumer Credit Act 1974, you generally have the right to settle your car finance agreement early, whether it’s HP or PCP. If you don’t receive a response in a reasonable timeframe, escalate it via the lender’s formal complaints process. If they still don’t cooperate within eight weeks, contact the Financial Ombudsman Service (FOS), they can step in and require the lender to act.

For support, you can also reach out to National Debtline, MoneyHelper, or Citizens Advice. Keep a paper trail of all your correspondence to protect your position and make escalation easier.

Car refinancing can lower your credit score in the short term due to the hard credit search and a new account being added to your report. But don’t panic, this dip is usually temporary and once you start making your new loan repayments, your credit score will start to recover. In fact, if your new deal comes with more affordable repayments and reduces the chances that you’ll miss a payment, refinancing could even improve your credit score over time.

There’s no set limit to how many times you can refinance but just because you can, doesn’t mean you should. Each new deal comes with fees and a credit check, and if you keep extending the term, you could end up paying more interest in the long run.

Yes, you can refinance with bad credit but you might have fewer options and interest rates could be higher. Some lenders specialise in bad credit car finance, and refinancing could still help you manage your payments better through longer term and lower repayments (paying more interest over time) or cover a PCP balloon payment.

To refinance your car with Carmoola, you’ll need to provide:

• Proof of ID (like your driving licence)
• Proof of income (such as bank statements)
• A settlement quote from your current lender

Car refinancing can lower your monthly payments depending on your loan terms and financial circumstances.

One of the biggest reasons why you might be tempted to refinance your car is to reduce your monthly payments. Maybe you’ve had a change in circumstances, your expenses have gone up, or you’d just like to save a little more each month if you can.
 
If lowering monthly payments is your priority, you might be able to refinance with an extended loan term that spreads the cost of your financing over a longer time, although this will likely cost you more in interest overall.
 
You may also be able to lower your monthly payments if your credit score has improved since you signed your original loan agreement, and you’re now eligible for a loan with a lower interest rate.

While most refinancing loans will be from a new lender, you might be able to refinance with your existing lender if they have an option that suits you and your current circumstances.