When Should You Refinance Your Car?
When Refinancing Does and Doesn’t Make Sense
You’re driving into work and hear an advertisement on the radio for an enticing auto financing special. Maybe it’s 0% for 72 months, or 1.99% on in-stock used vehicles. It gets you thinking. No, you don’t need a new car, but the financing agreement you made with the F&I department just a few months back seems like a raw deal after hearing those great new rates.
You’ve decided that you could probably get a better auto loan rate. After all, your credit has improved since you drove off the lot, and now it’s not a matter of should you refinance your car, but when you should refinance your car.
The good news is that refinancing your car can indeed get you a better auto loan rate, possibly saving thousands in interest charged over the life of your loan. While you may have heard a horror story or two about the hoops friends have had to jump through refinancing their home, you can rest easy knowing that refinancing a car isn’t as difficult or time consuming as a home refinance.
So, when should you refinance your car? Refinancing an auto loan isn’t for everyone, after all.
Your Credit Has Improved Since Taking Out Your Original Loan
Obviously, your credit score is a very important factor in determining your auto loan rate. The more risk associated with an auto loan, the higher your rate is going to be.
If in the past several months you have made a diligent effort satisfying other debts, whether they be lowering credit card balances, paying off a student loan or making a few extra mortgage payments. There’s a good chance your credit score has improved.
Today, many credit card companies show customers their trending FICO credit score for free online. Other tools like Credit Karma, show registered users their TransUnion and Equifax scores for free. Regardless of whether you are wondering if you should refinance your car or not, knowing your credit score is incredibly important to understanding and improving your financial well-being.
You’ve Been Diligent About Making On-Time Payments
If you’re wondering if you should refinance your car a week or two after executing the loan, now is probably not the best time to refinance.
While it’s true that your credit score takes payment history into consideration, a lender should look at your unique circumstances as well. They will be more apt to extend a lower auto loan rate knowing your history as a dependable borrower.
Several months of on-time payments resulting in a principle balance several thousands of dollars lower than the origination amount will improve your eligibility for an auto loan refinance.
Interest Rates Have Improved
Interest rates are constantly changing. Maybe it’s been a few years since your car loan originated, and rates have improved significantly since then.
This is probably the most common reason why people refinance their vehicles. If there’s a lower available rate out there, it would be advantageous of you to take it.
You Didn’t Get the Best Rate to Begin With
Interest rates can vary drastically from lender to lender and dealership to dealership. You may have gotten a good deal off the sticker price, but F&I managers at dealerships rightfully have the best interest of their business in mind, and have been known to give rates higher than a customer could actually qualify for. Convenience often drives consumers to go with the dealership financing package when they could have been better served seeking pre-approval at a local credit union beforehand.
If you feel like you deserve a lower rate than you were given by the dealership based on personal knowledge of your credit score and debt-to-income ratio, it may be worth your while to at least investigate whether you should refinance your car or not.
You’re Looking to Cut Costs or Save Money
Given the above scenarios, you may be a candidate for auto loan refinancing. While refinancing eligibility hinges on your credit score and other variables, it doesn’t make good sense to be stuck with a high interest car loan when you could use that money to pay off other debts, plan a vacation or build your savings.
Consider a 72-month auto loan with an original balance of $25,000 at an interest rate of 6.5%.
If you were able to lower that rate to 2.75%, your payments would decrease by more than $40 each month.
That equates to a lifetime savings of over $3,000 on your auto loan.
That’s a very nice free vacation.
Refinance Your Auto Loan Today
So, when should you refinance your car? If your situation resembles any of those described, today could be the answer. Refinancing a vehicle can be a hassle-free experience, possibly saving you thousands in interest charges over the life of your auto loan.
Consumer Auto Refinance Services (CARS) specializes in these arrangements, and makes auto loan refinancing simpler than you could ever imagine. Just fill out our no-obligation application online and let us take care of the rest. Find out if we can help lower your rate today.