As vehicle prices continue to rise, many New Zealanders are turning to vehicle financing to afford their dream cars. However, as financial circumstances change, some may wonder whether refinancing their vehicle is smart. In this blog, we will explore the pros and cons of refinancing your vehicle in New Zealand, helping you make an informed decision that aligns with your financial goals.

Understanding Vehicle Refinancing:

Refinancing a vehicle involves taking out a new loan to replace an existing one or to modify the terms of an existing loan. This could be done to reduce monthly payments, lower the interest rate, or extend the loan term. In New Zealand, vehicle refinancing is becoming increasingly popular due to its potential to save money and improve financial flexibility.

The Pros of Refinancing:

Lower Interest Rates: One of the primary reasons people opt for refinancing is to secure a lower interest rate. If your credit score has improved since the initial loan, you may qualify for a more favourable rate, leading to significant long-term savings.

Reduced Monthly Payments: By extending the loan term, you can spread your remaining payments over a longer period, resulting in lower monthly instalments. This can help ease financial strain and free up funds for other essential expenses.

Improved Cash Flow: Refinancing may allow access to better terms and conditions, freeing up additional cash that can be invested elsewhere or used for emergencies.

Changing Financial Circumstances: Life is unpredictable, and financial situations can change. Refinancing allows you to adapt your vehicle loan to match your current financial capacity, especially during challenging times.

Switching Lenders: If you’re unhappy with your current lender or their services, refinancing lets you switch to a different financial institution that better suits your needs.

The Cons of Refinancing:

Extended Loan Term: While a longer loan term reduces monthly payments, you’ll pay more interest over time, potentially outweighing the benefits of reduced monthly instalments.

Additional Fees: Refinancing often involves various fees, such as application fees, processing fees, and early termination fees from your existing loan. These costs need to be factored into your decision.

Negative Equity: If your vehicle’s value has depreciated significantly, you might owe more to the car than it’s currently worth. Refinancing could lead to negative equity, making selling or trading in the vehicle challenging.

Impact on Credit Score: Applying for new credit can temporarily impact your credit score. While refinancing itself may not significantly affect your credit, multiple credit inquiries within a short period could have adverse effects.


Deciding whether refinancing your vehicle is good or bad in New Zealand requires careful consideration of your financial situation and future goals. Refinancing could be beneficial if you can secure a lower interest rate and reduce your monthly payments without substantially extending the loan term. However, weighing the potential drawbacks, such as additional fees and the risk of negative equity, is essential. Consult with financial advisors and lenders to determine the best course of action tailored to your circumstances. Remember, a well-informed decision will lead you to financial stability and freedom.

If you’re uncertain whether refinancing is right for you, don’t hesitate to contact us. Link Finance can assist you in assessing your situation and determining if refinancing will make financial sense for you. Through our reputable financing partners, we aim to help you secure a better interest rate and reduce your monthly payments.