Car refinance explained

If you have taken out finance in order to purchase your car, you may be able to refinance onto a different deal. There are various reasons you may do this, such as lowering the interest rate, the monthly payment, or helping to finance a balloon payment if you have a Personal Contract Purchase (PCP) deal. Refinancing may benefit you if your credit score has improved, you didn't shop around for your original deal, or other circumstances have changed.

Refinancing involves getting a new finance agreement and using this to repay your existing agreement.

Motiv considers a range of finance types to try and help you find the most suitable option when refinancing your current deal, and you can easily check for a deal without affecting your credit score.

Below we go through the key steps and highlight a number of considerations you should assess when working out if refinancing is suitable for you.

Key steps:

1. Understand your existing finance deal

It is important to understand your existing finance deal when considering refinance. Your credit agreement will have key information such as: offer type, APR and monthly payment. This is useful, both for comparing your existing deal vs. any refinance deal and to help Motiv estimate your settlement figure if you haven't requested that from your existing finance provider. Some finance deals come with certain consumer protections, that you should also consider.

2. Get your settlement figure, or use the Motiv calculator for an estimate

To refinance, you will need a settlement figure from your current lender. Check with the lender how to do this as it can vary, for example, some have online processes and in some cases you may need to call them. Getting your settlement figure can take a few days so Motiv have also built a calculator that will estimate your settlement figure. You just need to ensure you have the right information to hand, so your credit agreement for your existing deal might be useful.

3. Check to see if you could refinance and compare vs. your current deal

Use the Motiv refinance tool to understand what deals are available from Motiv's panel of finance companies. You can compare the refinance offer (if you receive one) to your existing finance deal.

4. Consider your options

Once you have your refinance option it's now worth ensuring you understand the key considerations to decide if refinancing is suitable for you.

There are several areas for consideration and two key ones are discussed here:

  1. Financial – how will the refinance deal affect the interest you are charged and your monthly repayments?
  2. Rights & options – how will the refinance deal change any rights and options you have?


The below table aims to help you understand the financial impact of the refinance deal based around how the key terms of APR and monthly payment are changing:

APR change Monthly payment change Considerations
Same or higher -
  • In this situation, refinancing is unlikely to be a good option
  • If you are finding monthly payments unaffordable then consider contacting your current lender as they may be able to help
Lower Lower
  • In this situation, refinancing could be a good option as the APR will be lower
  • However, if the end date of your refinance deal is later than your current one, you may end up paying more in interest overall
Lower Higher
  • In this situation, refinancing could be a good option. The APR will be lower and as the monthly payments are higher you should be paying down your balance more quickly, meaning you'll be paying less interest overall
  • However, you should consider whether the new higher monthly payment is affordable to you

Rights and options

Depending on the type of deal you are refinancing from and to, the way your rights and options are affected will differ. The below table aims to explain some of the main considerations. If you have any further questions around these, we suggest you speak to the finance company offering the refinance deal:

Current deal New deal Refinancing considerations
Hire Purchase / Personal Contract Purchase (PCP) Personal Loan
  • In moving to a Personal Loan, you'll take full ownership of the car from the point the new agreement is in place, meaning it is no longer at risk of repossession
  • There will be no balloon payment to pay at the end of the new deal (relevant if you are currently on a PCP where there will be one)
  • You will lose the following rights:
    • any right to hand back the car to the finance company
    • any protection the finance company may offer should anything go wrong with the vehicle
Hire Purchase / Personal Contract Purchase (PCP) Hire Purchase
  • The car will be owned by the new finance company until all payments on the refinance deal are made
  • You may continue to get some protection from the finance company should anything go wrong with the vehicle
  • There will be no balloon payment to pay at the end of the new deal (relevant if you are currently on a PCP where there will be one)
  • The following rights you have will be affected:
    • any current or future right to hand back the car to the finance company. Note that you will not lose this right completely, but the point at which it will become an option may be delayed
    • any protection the finance company may offer should anything go wrong with the vehicle

5. Proceed with the refinance offer

Once you've weighed up if the refinance offer is for you, and if you decide it is, you can then proceed to submit your final application with the new finance company.

The exact process will vary by finance company but typically you will need to:

  1. Request your settlement figure from your current lender if you haven't done so already. This figure will then help finalise the details of your refinance deal
  2. Complete any final information & checks on yourself that the new lender requires
  3. If refinancing onto a Hire Purchase agreement, complete any checks on the vehicle the new lender requires, for example, to confirm condition and ownership
  4. Complete any paperwork required to take out the new agreement


If you're over 18, live in the UK and looking to understand if you could refinance your car, then this service is for you.

Yes. All the personal information you supply us with is stored in Motiv's secure data centre in the UK. Motiv need to share this data with carefully selected third parties in order to provide our service, but when doing so this always do so in an encrypted fashion. More information regarding how your personal information is handled is included in the privacy policy.

A soft search (also known as a quotation search) doesn't leave a mark on your credit file that is visible to lenders, so doesn't affect your credit score. Motiv only use soft searches, so you're in safe hands. If you decide to actually apply for credit then you'll have a hard search done, but this will be done by the lender after you've decided you want to proceed with an application with them.

Annual percentage rate, or APR, is a measure of how much interest the lender is charging you for your loan. It's the yearly cost of borrowing money, factoring in any fees and is typically used to allow finance options to be compared more fairly.

When you use this service, as part of a product offer you may see your personalised chance of getting accepted for it, should you choose to apply. This is called "Acceptance" in Motiv's service. This can range from 100% (you'll get accepted pending final lender checks) down to 0% (you'll definitely get declined). This is now common on many price comparison sites.

When Motiv display an APR and monthly payment, it will often be identified as a "Guaranteed Rate". This means that this is the actual rate you'll get if you are accepted for that deal. This may sound obvious but it's often not the case. Sometimes a product may be advertised with a "Representative APR" and in these cases the rate you end up with (should you apply) may be higher than the one advertised. Motiv make it very clear whether a rate is guaranteed or otherwise.

On your results page Motiv will aim to show you the cheapest offer you're likely to be approved for.

No, you will not be changed charged a fee. Our service is provided for free, however we will receive commission payments from the lenders or brokers we introduce you to. We receive commission when finance is taken out. This is either a fixed amount per finance agreement taken out or a fixed percentage of the amount lent. The specific details may vary depending on who we introduce you to and the type of product you take out.

Car finance comes in many forms, but put simply – it's any finance that allows you to buy a car. The main types of finance used when buying a car are Personal Loans, Hire Purchase & Personal Contract Purchase (PCP).

Please see our car finance explained guide which explains the different offer types.

For your new refinance product, on top of the interest that is charged on the finance, there can be fees charged by the lender. These will always be displayed as part of the product advert and will be included within the APR. The types of fees you might see include "borrowing fees", "up-front fees" or "documentation fees" and "option-to-purchase" fees. "Borrowing fees" are typically added to your loan so you pay them back over the term of the loan. "Up-front fees" or "documentation fees" are charged as one-off fees at the start of the loan and "option-to-purchase" fees are charged at the end of the loan (often automatically as part of the final payment). You should also check whether your existing finance provider will charge you any fees for leaving your agreement.

Regardless of which type of finance you refinance on to, you will always be responsible for insuring, taxing and maintaining the vehicle (including MOTs where applicable).

If you have refinanced on to a Personal Loan, responsibility for resolving any fault (including any associated cost) will sit with yourself. If you have refinanced on to Hire Purchase agreement, we suggest you speak with your finance company as they may take some responsibility for solving the matter.

It is unlikely you will be able to switch back to the previous deal. That will have been settled and you will have a new credit agreement in place with the new lender. Therefore, you should be confident the refinance deal is suitable for you before committing.

A settlement figure is the amount required to fully repay your current finance deal. It will include any fees and rebate on interest charges that may be due.

You'll need to ask your current car finance lender to provide your settlement figure before you can complete your switch. They can usually do this over the phone, via email (which takes approx. 2-3 days) or by post (which takes approx. 7 days). A settlement figure is valid for 28 days from the date you request it.

As getting your settlement figure can take a few days, Motiv have also built a calculator that will estimate your settlement figure to help you search for a cheaper deal.

Motiv have built a calculator that will estimate your settlement figure to help you search for a cheaper deal (since getting settlement figure from your current car finance lender can take a few days).

We'll use the information you provide to us, alongside some assumptions, to estimate your settlement figure. This includes consideration for fees and any rebate on interest charges, and is inline with the relevant UK legislation – specifically "The Consumer Credit (Early Settlement) Regulations 2004".

The assumptions we use in our estimate calculation are:
  • You are up to date with your repayments
  • Your current finance agreement came into effect on the first day of the month in which it started
  • Your repayments are made on the last day of the month (and when you're estimating your settlement figure on the last day of any given month the latest repayment has already been made)
  • Any balloon payment is due on the last day of the last month of the agreement
  • The settlement date is 28 days from when the estimate is calculated
  • Your lender will charge a "compensatory amount" (sometimes referred to as an early repayment fee or early settlement fee) and this calculated from your outstanding loan after your most recent repayment. This amount is assumed to be in line with the relevant UK legislation – specifically "The Consumer Credit Act 1974"
The estimate we calculate can be used to help you search for a cheaper deal, but you will need your actual settlement figure before you're able to switch to a new deal.

If at some point after refinancing you decide you do not want to continue with your new agreement, your options depend on the type of finance you have taken out and how far into the agreement you are.

Repaying the finance
For all regulated Personal Loan and Hire Purchase agreements under £25,000, you can usually cancel within 14 days of the agreement being signed. This period is often called a "cooling off period" and the lender will provide you with details of the specific process you would need to follow in order to do this. It will involve you repaying the finance in full (whether in cash or via an alternative finance arrangement). If the loan is for £25,000 or greater Motiv recommend you speak with the lender directly regarding your rights.

Beyond 14 days, all regulated credit agreements allow for “early settlement”. If you wish to do this, you should contact the lender (ideally in writing) and ask them to tell you the total amount you must pay to clear the loan in full. This is amount is called an “early settlement figure” and once you have this to hand, you'll have 28 days from when they received your request to pay the amount off in full. Note that when calculating the early settlement figure, the lender is required to include a rebate for a portion of the interest charges that is yet to be incurred (the exact portion depending on how close to the end of the agreement you are).

Voluntary termination
If you have refinanced on to a regulated Hire Purchase agreement you may be able to "voluntarily terminate" – a right that is offered to consumers under UK Law once you have paid more than 50% of the total amount payable (which should be noted in your credit agreement). With this option you would hand the car back to the finance company and would not be liable for any further repayments.

Whether you're eligible for refinance depends on your car, your credit history and your financial position. There's lots of things to consider. Luckily, Motiv have developed a way of you checking if you're eligible to refinance in just a few minutes.

Motiv work with a range of lending partners. So even if you have limited credit history, there may be options available.

Motiv work with a range of lending partners. So even if you have recently moved to the UK, there may be options available.

Motiv work with a range of lending partners. So even if you have a poor credit history, there may be options available.