If you are a first time car owner, there is a good chance you financed your vehicle purchase through a car dealership. Depending on the deal you signed, you might be paying thousands of dollars more each year than you have to. Let’s find out how auto refinancing can save you money.
Lack Of Experience
When someone goes to buy their first car there is a lot of emotion involved. Car dealers know this, and some of them take advantage of unwary buyers. For example, dealers will sometimes treat the financing and sale as if it is all one deal. However, financing is a completely independent process and should be negotiated separately. If you weren’t paying attention, you might have accepted a high interest rate.
A refinanced car loan with lower interest can reduce your costs. Get a free auto refinance quote from CARCHEX now.
Some dishonest salesmen even intentionally mark up interest rates when they think they can get away with it. One scam is to tell you that your credit rating does not qualify you for a lower rate – even if your credit score is fine. Just bumping up the interest rate a few percentage points can translate into thousands of dollars of easy profit for the dealer. All they have to do is get you to sign the agreement.
“How Much Can You Pay Each Month?”
This question is one of the oldest tricks that car dealers might use to get more money out of you. Once they get you to commit to a monthly payment, they then stretch the loan term over a very long period. So you end up locked into a bad loan where you are over paying on interest. Remember, every percentage point that the dealer convinced you to pay over their buy rate is pure profit for the dealership.
How Refinancing Helps
When you refinance your auto loan, you replace your old loan agreement for a new one with lower interest. Under the refinance terms you can reduce your monthly payment. Another option is to keep paying the same amount each month but reduce the term of the loan – that is, you pay off your loan faster.
While dealers might not compare lenders to get you the best rate, when you refinance you have many choices. Banks, credit unions and online lenders all compete for your business which drives prices down. There is a good chance that you can find a great deal especially if your current loan has high interest.
Auto Finance Networks
This might be the best way to shop around for the lowest refinance rates. Auto finance networks are a collection of lenders that can all be accessed from one place. Your current auto loan info is sent to various lenders who compete for your business. The result? Lower interest rates and lower car payments for you.
CARCHEX has access to nearly 100 quality lenders. Getting a refinance quote is fast, free and easy.
Published in CARCHEX Auto Finance Resources by CARCHEX on February 26, 2015