How to Refinance a Car

by Contributor

It is relatively easy to refinance a car during its first 4 or 5 years of service, because a growing number of lenders are competing to acquire as much automobile financing "paper" as they can. Since car values are not nearly as volatile as boom-and-bust housing values, they do not involve as much potential risk for either lenders or consumers.

Assess Your Reasons for Refinancing Your Car

Refinance your car if you had below-average credit when you purchased the car and were originally forced to lock in a high-interest rate. Greatly improved credit can lower your interest rates and reduce your monthly payment significantly.

Watch the market rate for new car interest rates and be ready to refinance a car if rates fall significantly below the level they were at when you purchased your car. Even if you had great credit and got a good rate for that time, a better rate now may save you hundreds of dollars over the life of your car loan.

Refinance your car as a way of borrowing against it if you paid cash for it or have significant untapped equity in the car but need access to cash now.

Amortize your car's remaining asset value and turn it into a tax-deductible monthly "operating expense" by refinancing it if you use it in your business activities.

Get the Best Refinancing Deal Available

Spruce up your credit rating in any way possible before you apply for refinancing, since the terms and interest rates available to you will be much more favorable if you have a credit rating of 680 or higher.

Get a credit report from Experian, TransUnion or Equifax. Correct any mistakes and pay off high balances or late items at least one month before you intend to get refinancing on your car.

Check for automobile refinancing rates on and enter your basic information so that refinancing companies can compete to offer you the best refinancing terms and interest rates.


  • check Consider making a one-time lump sum payment at the time of refinancing to reduce the amount of your monthly payment. This may also help you qualify for a lower interest rate if the ratio of your loan to the value of your car drops significantly.


  • close Always pay attention to refinancing fees and hidden charges in any refinancing deal. Having to pay a significant upfront fee may offset the savings you are hoping to reap when you refinance.

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