Getting car finance is the part people focus on most: finding the right vehicle, getting approved, and making the monthly payments work. But the agreement you start with doesn't always stay perfect forever.
Yes, you can refinance your car if a lender is willing to offer you a new agreement.
People refinance for different reasons. Your income may have increased, you've continued to improve your credit score over time, or your current monthly payments no longer fit your budget. Some drivers also use car refinance to spread a PCP balloon payment over monthly repayments instead of paying it all at once.
Approval still depends on the lender's checks. If they are happy with the offer, they'll settle your current car finance and replace it with a refinancing agreement. From your perspective, the car stays the same.
The key question isn't whether you can refinance your car. It's whether the new agreement leaves you in a better position than your current one once everything is taken into account.
These estimates are subject to credit checks and may change when you apply for finance. this is for example purposes only
Maximum borrowable amount
Rates from 9.9% APR: the exact rate you will be offered will be based on your circumstances, subject to status. Representative Hire purchase (HP) example: borrowing £7,000 over 5 years with a representative APR of 21.9%, the annual interest rate of 21.9% (Fixed) and a deposit of £0, the amount payable would be £185.33 per month, with a total cost of credit of £4,119.81 and a total amount payable of £11,119.81. We look to find the best rate from our panel of lenders and will offer you the best deal that you're eligible for. We receive a fixed fee commission per finance agreement, or we receive a commission based on a percentage of the total amount of finance taken. This will not affect the interest rate offered or the total amount repayable. Our service is free.
Refinancing a car means replacing your current finance agreement with a new one. The new lender pays off the remaining balance on your existing agreement, and you repay the new loan under different terms.
The process will be slightly different depending on the type of car finance you have. With hire purchase (HP), the new lender settles the outstanding balance and replaces your existing agreement. With personal contract purchase (PCP), you may also have the option to refinance the final lump sum payment if you'd like to keep the car without paying the balloon payment all at once.
Other than that, whether you have PCP or HP, the idea is the same: you're replacing one finance agreement with another.
It can, but not in every case. If you qualify for a lower interest rate or a shorter loan term, car refinancing could reduce the amount of interest you pay. In other words, you’ll reduce the total amount you repay over the life of the loan.
Alternatively, you can reduce your monthly payments, but that means a longer repayment term, so you could end up paying more interest overall.
The only way to know if the process will save you money is to compare your current deal with the new one, including the interest rate, fees, settlement figure, and any early settlement charges.
There's no set waiting period for refinancing.
If your current car loan allows early settlement, you can apply to refinance at any point. That said, many people choose to refinance because they have a chance to pay less interest. In other instances, their financial circumstances may look stronger than when they took out the original car loan.
Before you switch, check that the new finance agreement improves your position once all the costs are included.
Yes, you may still be able to refinance your car with bad credit.
Some lenders specialise in bad credit car finance; the market is broader than many people expect. A lower credit score will most likely reduce your options, but it isn't the only thing that decides the outcome. You’ll be evaluated based on your income, repayment history, the amount left on your current loan, what you can afford, and the value of the car.
If your first application isn't successful, another lender may reach a different decision.
It can affect your credit, but only for a short time.
Many lenders let you check your eligibility with a soft credit check, which doesn't affect your credit rating. If you go ahead with a full application, the lender will usually carry out a hard credit check. This appears on your credit file and may temporarily lower your score.
If you make your repayments on time after refinancing, you can build a stronger credit history long-term.
Missing payments when refinancing is treated in the same way as missing payments on any other agreement.
Your lender may charge late fees and report missed payments to the credit reference agencies, which will damage your credit score. If the payments continue to fall behind, the lender may begin the process of recovering the debt. As the loan is secured against your car, the lender may repossess it.
If you think you're going to miss a payment, don't wait until it happens. Contact your lender as soon as you can. They may be able to offer temporary support or find better refinancing solutions before the situation becomes more difficult.
Most lenders ask for the same core information when you apply to refinance a car loan:
If you've weighed up the costs and decided to refinance your car, the next step is simply to work through the application. Here's what to expect.
Start by asking your current car finance provider for a settlement figure. This is the amount needed to clear your current finance agreement in full, and it's different from simply adding up the remaining monthly payments.
Ask whether the figure includes any early settlement charges.
Most lenders ask for similar information, so it makes sense to collect it before you start your refinancing application. That way, you won't need to stop halfway through to look up loan details or find supporting documents.
Some lenders can give you an initial decision with only a few details. The rest usually comes later in the application.
This is where car refinancing either works in your favour or doesn't.
Look at the interest rate, APR, loan term, fees, and total amount payable. If one lender offers lower monthly payments by adding another two years to the loan, you could pay less each month but more interest overall.
If you have a PCP contract, check what happens to the final payment. Some lenders refinance it into monthly repayments, but this varies.
Some lenders start with a soft credit check, which lets you see if you're likely to qualify without affecting your credit score. If you decide to go ahead with refinancing, a full application will involve a hard credit check.
If the application is approved for refinancing, the new lender will normally pay your current lender directly. The existing loan agreement is settled, and the new one replaces it.
Compare and find the best car finance deals quickly and easily even with bad or poor credit. When comparing deals, you can also factor in the part-exchange value of your current car to reduce the overall cost.
Getting a finance quote with Carplus won't affect your credit score, but a hard search will be completed before completion of the deal
No-deposit car finance options are also available. Check your eligibility today with a soft search and find out what you qualify for.
Get your UK car finance decision in minutes. Check your eligibility first. Apply in confidence with Carplus
There isn't a set credit score you need to refinance your car. Every lender decides its own criteria, so one may accept an application that another declines. Alongside your credit score, they'll also look at your income, current finance agreement, repayment history, and whether the new loan looks affordable.
If your credit score is stronger than it was when you first took out the loan, you may have access to better rates than before.
Yes, although your choice of lenders may be smaller, and it could mean higher interest rates or stricter lending criteria. What's great is that lenders consider your application as a whole. A stable income, consistent repayments, and a manageable amount left on your current loan should all help.
Yes! And if your score has improved since you arranged your current car finance, refinancing could give you access to better terms.
It can be anything from a day to a couple of weeks. The refinancing process can take longer if your current lender is slow to provide a settlement figure.
There's no fixed limit. You can refinance more than once if a lender is willing to offer a new agreement. People tend to do this after their credit improves or when interest rates become more competitive.
Yes. Some providers are willing to replace your current agreement with a new one rather than leaving you to move elsewhere. Even so, it makes sense to compare a few refinance deals first. Your current lender isn't always the most competitive option.
Yes. A cosigner can strengthen your refinancing application if your credit history is limited or you've had trouble getting approved on your own. They'll agree to take responsibility for the car loan if you stop making payments, which can reduce the lender's risk.
Yes, being self-employed doesn't stop you from refinancing your car. The main difference is how you prove your income. Instead of payslips, a lender may ask for tax returns, bank statements, or accounts to show your income is steady enough to support the repayments.
As with any car finance application, the lender will decide based on your overall application (credit history, current financial commitments, etc.).
No, refinancing your car is never guaranteed. But if your first application is declined, it doesn't necessarily mean you won't be able to get a refinancing deal. Another lender may reach a different decision, especially if your financial situation has improved since you took out your current car finance.
You may be able to refinance a car with negative equity. Some lenders are willing to refinance if the overall borrowing still makes sense and the repayments fit your budget. Others may decide the extra debt is too much to take on.
