Pressure at the pump drives savings

As the price of unleaded petrol rocketed to more than $1.39 per litre last week in a 29-month high.

Australian motorists began to feel the pinch at the pump. But it's not all bad news for drivers, who are seeing this as an opportunity to save money elsewhere, such as on car loans.

While for some motorists the average $0.029 price hike means an extra $30 each month to refuel the family car, compared with six months ago, others are saving by reassessing their vehicle and finance options by:

• switching to a more fuel-efficient model
• comparing fixed and variable rate car loans;
• accelerating repayments in good times; or
• comparing car loans and refinancing.

Not all of us can afford to drive the latest hybrid model or even downsize to a "smart" car, but that doesn't mean the propensity to save money on your car is limited. The biggest savings can be found by comparing car loan products, weighing up fixed interest with variable rates and refinancing to better suit your situation.

If you are considering a new loan type or switching to another lender, compare car loans online with RateCity's comparison tool. For instance, if you found that one of the top variable rate car loans on RateCity was at 8.74 percent and you currently pay 15.5 percent on a $10,000 car loan, by switching you could potentially save around $30 each month or almost $2000 after five years.

Savings such as this can counteract petrol price hikes in your budget and may even mean car owners are able to clear debt sooner and start saving for any future petrol price rises, which are inevitable according to some experts.

Some economists have forecast a further $0.04 rise per litre within a fortnight. Others say petrol prices will reach $1.50 per litre within a month, as the price of crude oil rises as a result of political unrest in the Middle East and North Africa.

If economic forecasts of further price spikes at the bowser come to fruition in the next few weeks, any extra savings will be welcome.

Before you make the switch, consider the exit fees imposed by your current lender as well as any establishment fees that you may incur with a new car loan. Also, keep an eye on the market and reassess your car loan every 12 months to see how it compares with what is available.

Find best interest rates and no ongoing fees at RateCity.