How To Refinance Your Car
Advantages of refinancing car loans
If you're wondering how to refinance your car, the simple answer is that it's simply a matter of finding better financing terms with another lender or renegotiating the terms and conditions with your existing lender. The process to refinance your vehicle is the same, regardless of whether you got your financing through a bank, through a car dealership or through a third-party source.
Unlike mortgage refinancing, it's fairly quick and easy to refinance your vehicle. First, make sure you're a good candidate for automobile refinancing, then understand how to approach lenders who may be able to cut you a better deal.
Refinancing car loans should be considered under the following circumstances:
- Interest rates have fallen since you purchased your vehicle
- You have since realized that you could have gotten a better interest rate through another lender
- You have improved your credit rating since you initially financed your automobile
- You need money for other purposes and can free up capital if you refinance your vehicle
- The vehicle is leased and you want to buy it outright
In the final scenario -- a leased vehicle that you want to purchase -- your financing will cover the lease but may not cover the subsequent purchase of the vehicle. Typically, lessees are offered the option to purchase the vehicle when the lease expires, and you may need to refinance your existing loan to cover the costs associated with that purchase option.
How to Refinance a Car Loan
To refinance a car loan, consult the bank you do business with and search online for lenders. Get the terms and conditions they're offering in writing, then sit down and do a comprehensive comparison with your current car financing to be sure you're getting a better deal. Take any penalties that you may suffer for terminating your current loan into account whenever you crunch the numbers.
Keep in mind that many vehicle financiers can approve your application very quickly, so don't be pressured into signing on the dotted line until you're sure you're ready to proceed. When you are certain you've found a better offer, take it to your current lender to see if they're willing to match it. If not, go ahead and make your car refinancing official.