£373.98 a month, £503 total
New monthly payment
£373.98
Total extra cost
£503
Refinance comparison
- Cost if you stay
- £12,960
- Cost if you refinance
- £13,463
A lower rate can cut the total, but stretching the term can wipe out the saving. Compare the total cost, not just the monthly — and watch for any settlement or arrangement fees.
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How we work this out
We work out the monthly and total payable on your current balance at your current rate, then at the new rate, over the remaining term. Monthly = balance × monthly rate ÷ (1 − (1 + monthly rate)^−term). Saving = current total payable − new total payable.
Figures are estimates. Check for early settlement fees on your current deal and arrangement fees on the new one before you switch.
Full method: how we calculate.
Refinancing car finance means replacing your current deal with a new one, usually to get a lower APR. This car refinance calculator compares the monthly payment and total amount payable if you stay against those at a new APR, so you can see the real saving or whether there is none.
A lower APR cuts the monthly payment, but a longer term can wipe out the saving. Enter the balance to refinance, your current monthly payment, the months left, the new APR (not the flat rate) and the new term in the calculator above to compare both deals side by side. The rest of the page covers fees, the break-even month and refinancing a PCP balloon.
What is refinancing car finance?
Refinancing is taking out new car finance to pay off your existing deal, normally to secure a lower interest rate or a smaller monthly payment. Your old agreement is settled and replaced by the new one.
You might refinance because your credit score has improved, because rates have fallen, or because the monthly is straining your budget. It only saves money if the new deal's total amount payable is lower than what you have left to pay on the current one.
Does refinancing actually save money?
Refinancing saves money when the new APR is low enough to beat your current total amount payable over the same remaining term. Dropping from 12.9% to 6.9% on a £12,000 balance over 24 months saves around £730.
Worked example
Current deal vs new deal compared
Compare the two deals on the total amount payable, not just the monthly. A lower rate over the same term is a clear win; a lower rate over a longer term may cost more overall.
Run your own numbers in the calculator above and compare the total amount payable, then check the new quote on the APR calculator, which turns any monthly quote back into a true-cost figure.
| Current (12.9%) | Refinanced (6.9%) | |
|---|---|---|
| Monthly | ≈ £566 | ≈ £536 |
| Total payable | ≈ £13,583 | ≈ £12,854 |
| Interest | ≈ £1,583 | ≈ £854 |
Watch the term and the fees
A lower rate can still cost more if you stretch the term, and fees can swallow a small saving. Always compare like for like over the same remaining months.
- Stretching the term lowers the monthly payment but adds interest, so a longer, lower-rate deal can cost more in total.
- Your current lender may add an early settlement fee. See the settlement calculator for the figure to clear.
- The new lender may charge an arrangement fee, which counts towards the true cost via the APR.
When refinancing is not the answer
If you only want a lower monthly, overpaying or voluntary termination can be better than refinancing. Refinancing is about the rate, not just the payment.
If your goal is to clear the finance faster, overpaying cuts the interest without a new agreement. If you simply want out of the car, you can settle early or, once you have paid half the total, use voluntary termination.
The break-even month: when refinancing starts paying off
If there's a fee to switch, the break-even month is how long it takes your monthly saving to cover it. Before that point, you're still behind.
Suppose refinancing cuts your monthly by £30 but the switch costs £300 in fees. The break-even point is ten months (£300 ÷ £30). If you have more than ten months left on the term, you come out ahead; if you'd clear the finance in eight, you never recoup the fee and refinancing costs you. Always divide any upfront cost by the monthly saving to find your break-even month, then check it's comfortably shorter than your remaining term.
Break-even worked example
Refinancing PCP versus HP
You can refinance either product, but the maths differ. Refinancing a PCP usually means settling the balance and deciding what to do with the balloon.
On HP you refinance the remaining balance at a new APR. On PCP you can refinance the monthly portion, or refinance the optional final payment (the balloon, set at the GMFV) into the new deal to spread it. Some people refinance a PCP balloon with a personal loan to own the car and avoid a lump sum at the end. Each route has its own true-cost maths, so run the figures on the PCP and APR calculators before you switch.
Can you refinance with bad credit?
You can refinance with adverse credit, but a worse file can mean a higher new rate than your current one, so it may not save anything.
If your credit has worsened since you took the original deal, the new rate you're offered might be higher, not lower, which wipes out any saving. If your credit has improved since you applied, refinancing is often where the biggest gains are. Check your file first, then compare the new offer to your current total amount payable, and don't assume a new deal is automatically cheaper. See car finance with bad credit.
How to refinance: the steps
Refinancing is a short process once the maths checks out. Follow the order to avoid paying for a switch that doesn't help.
- Get your current settlement figure, the amount to clear the existing deal now.
- Check for any early-settlement fee (up to about a month's interest under the Consumer Credit (Early Settlement) Regulations 2004).
- Shop a new rate with a soft search first, then compare the total amount payable.
- Work out the break-even month against any new-lender arrangement fee.
- Only apply (a hard search) once the new deal beats the current one overall.
Could a hidden-commission claim be worth more than refinancing?
If your current deal was mis-sold between 2007–2024 through hidden commission, redress could outweigh any refinancing saving. It is worth checking before you switch.
The FCA's redress scheme follows the Supreme Court ruling of 1 August 2025. Parts of the scheme are suspended pending a legal challenge, and payouts are expected in 2027 at the earliest, if the scheme is upheld and the judgment is not appealed. Estimate your position with the compensation estimator. It gives an estimate, not a promise, and you can claim free yourself.
Frequently asked
What does refinancing car finance mean?
Does refinancing car finance save money?
Can refinancing cost more overall?
Are there fees for refinancing car finance?
Should I refinance or overpay?
What is the break-even month when refinancing?
Can I refinance a PCP balloon?
Does refinancing hurt my credit score?
Sources
We cite regulators and official UK sources only.
- FCAfca.org.uk
- Consumer Credit Act 1974legislation.gov.uk
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