Interest rates · Car loans · 6 min read
Rising Interest Rates: Can Refinancing Your Car Loan Help Offset Higher Home Loan Repayments?
On 29 September 2026, the Reserve Bank of Australia lifted the cash rate by 0.25% points to 4.60%.
It was the fourth rise this year, following increases in February, March and May, and it takes the cash rate to its highest level since 2011.
For most households, the first place this shows up is the home loan. If your mortgage repayments have gone up this year, it's worth looking at your other debts to see where you can claw some of that money back. Refinancing your car loan is a good place to start.
4.60%
RBA cash rate after the 29 September rise
+1.00%
Total cash rate increases in 2026, across four rises
~$387
Extra a month on a $600,000 home loan (example)
How Much More Are Home Loan Repayments Costing?
The cash rate has risen by a full 1.00% since the start of 2026, and most lenders have passed those increases on to variable home loans.
As an example, on a $600,000 home loan over 30 years, a 1.00% rate rise (from 5.6% to 6.6%) adds about $387 a month to your repayments. That's more than $4,600 a year.
This is an illustrative example only. Your increase depends on your loan balance, remaining term and the rate your lender has passed on.
Do Rate Rises Affect Your Car Loan?
It depends on the type of loan you have.
Fixed-rate car loans
Most car loans in Australia are fixed for the full term. Your rate and repayments stay the same when the RBA lifts the cash rate.
Variable-rate car loans
A smaller number of car loans are variable. If you have one, your lender can increase your rate when the cash rate rises.
New car loans
Rates on new car loans have generally moved up along with the cash rate, so a new loan today may cost more than one taken out a year or two ago.
If you're on a fixed rate, the RBA's decisions won't change your car loan, though your current rate may still be higher than you need to pay. Read our guide to fixed vs variable rate loans for more on how each type works.
When Car Loan Refinancing Can Still Save You Money
With rates rising, car refinancing won't suit everyone. It's most likely to help if:
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Your current rate is high. If you took dealer finance or borrowed from a high-rate lender, your rate may still be well above what other lenders offer today, even after this year's rises.
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Your credit score has improved. A year or more of on-time repayments can move you into a lower pricing tier with many lenders.
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You're on a variable-rate car loan. Refinancing to a fixed rate locks in your repayment and protects you from further rises.
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You need lower monthly repayments. Extending your loan term reduces each repayment, which can free up cash for your mortgage.
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You have other high-interest debts. Some borrowers combine a car loan with credit cards or personal loans into a single repayment. See our debt consolidation loans for how this works.
A Worked Example
Say you have $30,000 left on your car loan at 12.9%, with 4 years remaining. Your repayment is about $803 a month.
Current loan
Interest rate
12.9% p.a.
Monthly repayment
~$803
Monthly saving
–
Total interest
~$8,560
Refinance, same 4-year term
Interest rate
8.9% p.a.
Monthly repayment
~$745
Monthly saving
~$58
Total interest
~$5,770
Refinance, extended to 5 years
Interest rate
8.9% p.a.
Monthly repayment
~$621
Monthly saving
~$182
Total interest
~$7,280
Keeping the same term saves about $2,800 in interest over the life of the loan. Extending to 5 years frees up about $182 a month, which covers almost half of the $387 home loan increase in the example above. Because the rate gap is large, you'd still pay less total interest than on your current loan, though you'd make 12 more months of repayments.
Allow for switching costs
You'd also need to allow for switching costs, such as your current lender's exit fee and the new loan's establishment fee, which reduce your overall saving.
This example is illustrative only and uses rounded figures. Your rate, fees and savings depend on your credit profile, vehicle and lender.
When Refinancing Won't Help
Car refinancing is unlikely to be worth it if:
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Your current rate is already competitive. If you locked in a low fixed rate before this year's increases, a new loan will probably cost more.
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You have less than 12 months left on your loan. There usually isn't enough interest left to outweigh the switching costs.
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Your exit fees are high. Break costs on some fixed-rate loans can cancel out the saving.
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You're already behind on repayments. Speak to your lender about hardship options first.
What About Adding Your Car Loan to Your Mortgage?
Think about the total cost
Some people consider rolling their car loan into their home loan, since home loan rates are usually lower. This can reduce your monthly repayment, but it also means paying off a car over 25 or 30 years. The total interest can end up much higher than a car loan over 5 years, and you'll still be paying for the car long after you've sold it. Speak to your home loan broker before taking this option.
How to Check If Refinancing Is Worth It
1
Find your current rate and payout figure. Your latest statement shows your rate. Ask your lender for a written payout figure that includes any exit fees.
2
Check your loan type. Confirm if your car loan is fixed or variable.
3
Compare total cost. Look at the comparison rate and total interest on a new loan, not only the monthly repayment.
4
Work out your break-even point. Divide your switching costs by your monthly saving to see how many months it takes to come out ahead.
We compare car loan refinance options across a panel of 40+ lenders and work out your saving after fees, so you can see if switching is worth it before you apply. For more on how a new term changes your repayments, read how refinancing can lower your car loan repayments.
Frequently Asked Questions
Will the RBA rate rise increase my car loan repayments?
Only if your car loan has a variable rate. Most car loans are fixed for the full term, so your repayments stay the same.
Is it worth refinancing a car loan when interest rates are rising?
It can be, if your current rate is well above what lenders offer today, your credit score has improved, or you need lower monthly repayments. If you already have a low fixed rate, refinancing is unlikely to save you money.
Can I lower my car loan repayments without refinancing?
You can ask your current lender about extending your term or changing your repayment frequency, though not all lenders allow this. If you're struggling to make repayments, ask about hardship assistance.
Will interest rates keep rising?
The RBA has said it will continue to do what it considers necessary to bring inflation back to target, including further increases if needed. No one can say for certain where rates will go, so compare your options based on what you're paying now.
How do I know if my car loan rate is too high?
Compare your rate with what lenders currently offer borrowers with a similar credit profile and vehicle. If you took dealer finance or your credit has improved since you applied, there's a good chance you can do better. Get in touch and we'll check for you.
Check If You Could Save
We compare car loan refinance options across a panel of 40+ lenders and work out your saving after fees, so you can see if switching is worth it before you apply.
