Buyer Question: Why should I consider refinancing my current vehicle? 

Comment: Refinancing vehicle loans, like refinancing home loans, has become very popular as interest rates have dropped in recent years.  Refinancing your current vehicle can reduce the total interest cost by either reducing the length of your current vehicle loan or by reducing your interest rate.

The interest rate on your vehicle loan maybe high for one or more reasons: 1) You financed it through a dealership who added an interest surcharge to your loan. 2) At the time of the purchase your credit rating was lower than it is today. 3) When you purchased your vehicle the loan interest rates were higher than they are today or 4) You were not able to qualify for or were not offered a 0%/low interest rate loan.

Savings will vary by the amount of your current loan balance, the amount you can reduce your interest rate and the change in the length of your new loan.

Example: A person with a loan balance of $15,000 will reduce the cost of interest on a 60 month loan by $420 for every 1% they drop the interest rate on their loan.

Buyer Tip: Keeping and refinancing your current vehicle will save the buyer interest and the cost of higher new vehicle depreciation and insurance.  These three items could offset the cost of several repairs.

Buyer Question: Will applying to multiple financial sources negatively affect my Credit Rating?

Comment: According to Fair Isaac Corporation, who developed the FICO credit rating score, “most credit scores are not affected by multiple inquiries from auto … lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.”

The following steps take approximately two hours and could save you up to $500-$1500.

1. Determine if your current loan has any prepayment penalties for paying it off early.  The amount of the prepayment penalties, if applicable, can be determined by calling your current lender. 
   
   Buyer Tip:  Your current funding source will seldom agree to refinance your current loan.
   
   
2. Apply for a vehicle refinance loan at Internet sites e.g.  E-Loan at www.eloan.com.
3. Apply for a loan at several local Banks and Credit Unions. Determine if their interest rates, fees and prepayment penalties are equal to or better than the Internet sites.

Determine if the Bank/Credit Union/Internet sites charge any fees and if their loans are subject to prepayment penalties.  You might see a state DMV fee, which is valid, for changing the lien holder on your loan.  This fee could range from $5 to $75.

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The purpose of website eAutoAdvantage.com is to provide the user with general information about the subject matter presented.  Website eAutoAdvantage.com is not intended, nor should the user of website eAutoAdvantage.com consider it, to be financial advice applicable to the user’s specific situation.  The user is solely responsible for the use of website eAutoAdvantage.com.  If the user has any question about a specific financial situation, they should seek counsel from a financial planner or CPA registered to do business in their state. Also see our general disclaimer.

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