Refinance car loan UK: when it saves money, and when it only lowers the payment
Refinancing replaces one agreement with another. It saves money only when the new total amount payable, including any early settlement charge on the old agreement, is lower than what remains on the one you have.
- agreements cover almost every financed car in the UK
- 3
- to withdraw from a regulated credit agreement, Consumer Credit Act 1974 s.66A
- 14 days
- of the total price is the voluntary termination ceiling, Consumer Credit Act 1974 s.100
- 50%
Figures in this panel are the statutory rights that attach to a regulated motor finance agreement, quoted from the Consumer Credit Act 1974 itself and linked in the sources below. KnownVehicle is not authorised for credit broking and introduces no lender: nothing on these pages is a quote, an application or a recommendation.
- 2 vendor product pages verifiedevery figure matched verbatim to the vendor's page
- Quoted and dated, never estimatedlast verification pass 2026-08-26
- 2 check types coveredeach with measured search demand behind it
The four figures that decide it
- Start with the settlement figure, not the balance. The balance shown on a statement is not what it costs to clear the agreement. Ask the lender for a settlement figure under section 94 of the Consumer Credit Act 1974: it applies the rebate the Act allows and is the only number the new lender can actually pay off.
- Compare totals over the same period. A refinance almost always lowers the monthly payment, because it restarts a term. That is not a saving. Put the remaining total payable on the current agreement next to the total payable on the new one and compare those two figures only.
- Check what the car is worth against what is owed. A lender refinancing a motor agreement is lending against the car. If the settlement figure exceeds the car's value, the shortfall has to be covered by a deposit or rolled in, and rolling it in is how negative equity survives from one agreement to the next.
- Ask your existing lender first. Where the reason for refinancing is affordability rather than price, the incumbent lender can often reschedule, and forbearance on an existing agreement is usually less damaging to your file than a new application after arrears have started.
Common questions
- Can I refinance a PCP?
- Yes, most commonly at the end, where the balloon payment is refinanced so you can keep the car rather than hand it back. Mid-term refinancing of a PCP is possible but rarely cheaper once the settlement figure is taken into account.
- Is there a penalty for settling early?
- A regulated agreement allows early settlement with a rebate of future interest, and the lender may add a limited charge set by the early settlement regulations. It is disclosed in the settlement figure, so ask for the figure rather than estimating it.
- Will refinancing hurt my credit score?
- A new application means a hard search and a new account, which dips a file briefly. Settling the old agreement in full is reported positively, so the medium-term effect is usually neutral or better if the payments are then met.
- Can I refinance my car with the same lender?
- Some will, particularly where you are taking a new car with them. As a way of lowering payments on the same car it is less common, because the lender is being asked to re-lend against an asset that has depreciated.
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Sources
Cite or embed this figure
The median advertised price of a single full car check in the GB car check market was £14.99 in August 2026, across 2 verified vendor product pages recorded in KnownVehicle Car Check Price Index.
Cite as: "KnownVehicle Car Check Price Index", updated 2026-08-26, https://knownvehicle.com/finance/refinance-car-loan/.