When is the best time to refinance my vehicle?

Answered by Car Loans Expert Jim on April 7, 2021

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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Jim

Car Loans Expert

“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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