When it comes down to fitting a new car into your budget, the biggest focus will be your loan repayment. Here's how to calculate your car loan repayment figure.
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Trade-in, sell or refinance your car: what to consider
Find out when it’s smart to upgrade or refinance, weigh the pros and cons of trade-in versus private sale, learn how refinancing works, and discover how to calculate your car’s resale value - all in one essential guide.
If you’ve owned your car for a few years and are ready for a change, there are several options to weigh up. The Australian market has seen a rapid shift towards hybrid and battery electric vehicles (BEV), especially in the medium car and medium SUV segments, but petrol and diesel vehicles still have a strong presence.
For some people, the next step is buying a different car. For others, it may make more sense to keep the same vehicle and review their current loan instead. The right approach will depend on your budget, the value of your car, your current loan terms and your personal circumstances.
Common options include trading in your car, selling it privately or refinancing an existing car loan. Each option has potential benefits, costs and practical considerations.
More: Research and compare different cars on sale in Australia
When to upgrade or refinance
A good starting point is to decide whether you need a different car at all. If your current vehicle still suits your needs, refinancing may be worth exploring depending on your loan terms and personal circumstances.
Carlos Gasser, General Manager of RACV Finance, says refinancing may be considered when a borrower’s circumstances have changed or they want to compare their current loan with other options.
For example, if you have paid down part of your existing loan, you may be able to refinance the remaining balance.
"Whether that is worthwhile will depend on the total cost of the new loan, including repayments, fees and charges, compared with your current arrangement," Gasser says.
Refinancing may also be relevant if your financial position has changed since you first took out the loan. For example, a stronger credit profile or lower overall debts may open up the options available to you, subject to the lender’s assessment and lending criteria.
Even where interest rates have changed, it is important to look at the full picture rather than focusing on one feature alone. A refinance may or may not leave you in a better position once factors such as loan term, fees, charges and repayment amount are taken into account.
More: Best car finance options in Australia: compare your choices
Pros & cons of refinancing
Refinancing can have advantages and disadvantages. In some cases it may reduce repayments or improve flexibility, while in others the costs may outweigh the benefits.
If you are refinancing without changing the vehicle, look closely at the repayment amount, loan term and any fees or charges, as well as the lender’s approval criteria.
"Market conditions can also influence whether refinancing is attractive, so it helps to compare current rates with the overall cost and structure of your existing loan," Gasser says.
For example, in a rising-rate environment, refinancing may be less attractive for some borrowers if current market rates are higher than the rate on their existing loan.
Fees and charges are an important part of the calculation. Depending on the lender and the loan, these may include application fees, early termination fees or other charges, and they can reduce or remove any potential benefit from refinancing.
More: Understanding car loan terms: what you need to know
Trade-in vs private sale
If you decide to replace your car, the next question is usually whether to trade it in through a dealer or sell it privately.
In general terms, the choice often comes down to convenience, time and the price you may be able to achieve.
A trade-in can be simpler because it is handled as part of the purchase of your next car. That convenience may appeal to people who want a straightforward process, although the amount offered may be lower than what could be achieved in a private sale.
Selling privately may give you more control over the asking price and may result in a higher sale price, but it also usually takes more time and effort. You may need to create listings, respond to enquiries, arrange inspections and test drives, and take steps to reduce the risk of scams.
Which option is best will depend on your priorities, including how quickly you want to complete the process and how much value you place on convenience compared with the potential sale price.
How refinancing works
If you are considering refinancing, it helps to review the process step by step.
Start with your existing loan. Check the current interest rate, repayment amount, remaining term, outstanding balance and any fees or charges that may apply if you pay out the loan early.
Next, compare alternative loan options carefully. Look at the interest rate, comparison rate where relevant, fees and charges, the loan term and the total amount you would repay over time.
If you decide to apply, the new lender will assess your application in line with its usual approval process and lending criteria. If approved, the new loan may then be used to pay out the existing loan, after which you would begin making repayments under the new arrangement.
Calculate your repayments: Estimate your monthly or fortnightly repayments on your loan
Calculating resale value
There are a few ways to estimate what your current car may be worth. One approach is to review listings for similar vehicles with a comparable age, condition, mileage and specification.
You can also use valuation and research tools, including RACV Car Match, as a guide. Estimates and valuations should be treated as indicative only and may vary depending on the vehicle and the market.
It can also help to have the car serviced and inspected by a reputable mechanic before selling. A current inspection report may give potential buyers more confidence and help you better understand the vehicle’s condition.
If you are considering a trade-in, it may be useful to obtain more than one view of value so you can compare the dealer’s offer with your own research and any likely private sale range.
Once you have reviewed the likely value of your current car and the costs of each option, you will be in a stronger position to decide whether to trade in, sell privately or explore refinancing.
Ready to continue your car buying journey?
R.A.C.V. Finance Limited ABN 82 004 292 291 Australian Credit Licence No. 391488. RACV Finance is subject to RACV lending criteria. Conditions, fees and charges apply.
Advice given in this article is general in nature and is not intended to influence readers’ decisions about financial products. You should always seek your own professional advice that takes into account your own personal circumstances before making financial decisions.
