When is the best time to refinance my vehicle?
I'm not satisfied with the terms of my original auto loan, so I'm thinking of refinancing. When should I refinance?
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Answered on Apr 07, 2021
Jim Donaher is a freelance writer and manager with over 35 years' experience in the insurance, banking, and investment management businesses. He provides expertise on a range of topics and is able to explain complex industry information in layman's terms. Jim is the author of two books, including Call Him, He's Home: A Guide to Prayer for Regular People and Then Larry Smiled, a novel about life, death, accountability, and salvation. Taormina, Sicily is his happy place!
“The short answer is: at least six months, and preferably at least a year, from the start of the loan.
Although you can theoretically refinance your car loan at any time, there are a few factors to consider before going ahead with this:
- How long have you been paying on the loan? If you haven’t been paying for at least six months (and more likely closer to 12 months), you may owe more on the loan than the car is worth. This is due to the immediate, rapid depreciation on a new car during the first year, and the fact that car payments mostly comprise interest in the first year.
- What is the current state of interest rates? If rates on new loans have increased, you may prefer to keep your current loan.
- Has your credit score improved? Even if interest rates are the same now as they were before, you might have been charged a higher rate earlier due to a poor credit score. If you have a good payment history with the lender and your credit score has improved, you may be offered a better rate when refinancing. “
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