Do You Want to Save Over $50 on Your Monthly Car Payments?

Your car payments might be costing you $600 a year more than they need to. Find out how to refinance a car loan and if it’s the right choice for you. You might just save some money.

April 17, 2019

Your monthly budget is as unique as you are, but if you’re like most of us, you have a few big categories of expenses (rent or mortgage, transportation, food), a lot of smaller expenses (clothes, entertainment), and only one or two income streams to cover everything. Every penny counts; otherwise, you wouldn’t need BillFixers to make sure you’re not overpaying!

So, if you’re trying to tackle your budget, it makes sense to trim wherever you can. One of the easiest ways to save on your monthly bills is by refinancing your car loan. The average borrower can save over $50 a month by refinancing to a new car loan, and the process is usually quick and easy.

What is Refinancing?

Why are you able to get a better loan after you’ve bought your car? There are a few reasons you may be eligible for a lower interest rate:


No more dealer markup:

If you arranged your car loan at the dealership, chances are that the dealer marked up your interest rate without telling you. The average markup on interest rates and other related products (like Vehicle Service Contracts and GAP waiver) is nearly $1,800. You can check the math for yourself at the Outside Financial Markup Index. If you have less-than-perfect credit or you went to an elite dealership like Asbury or Lithia, your markup was probably even higher.

More options:

Didn’t shop around for a car loan before buying your car? You likely didn’t get the best deal. Car dealers don’t have to tell you which loans you qualify for. In fact, they have no legal or ethical obligation to select the loan that’s best for you. Instead, they’re paid to pick the loan that’s best for them. That is, the loan that enables them to add in the highest loan markup and pay for marked-up ancillary products. Dealers also often have a limited selection of lenders they work with. So, the rates they offered you might not have been the best possible. If you refinance, you can shop around, including by using aggregators like Outside Financial to check multiple lender offers at once.

Improved credit:

You’ve likely improved your credit score if you’ve been paying off your car loan on time, every month, at least in the eyes of potential auto lenders. Auto lenders typically use a credit score model that weighs your experience with auto loans more heavily than other types of credit. So, being responsible with your car loan may mean you’re eligible for better loan rates this time around.

    Can Anyone Refinance a Car Loan?

    Almost anyone with a car loan can refinance, but you should make sure that you’re actually saving money with your new loan before you sign the paperwork. There are a few watch-outs to be careful of:


    Prepayment penalties:

    Very few auto loans charge prepayment penalties. But, if yours does, make sure those fees won’t cost you more than you’re saving with your new loan.

    Refinancing fees:

    Some car loan refinance providers charge you a fee to refinance. (We would never do that at Outside Financial). Again, always make sure that you’re saving money overall, counting in all fees and expenses. Every state charges some fees for title and registration, but those are usually less than $100.

    Lender requirements:

    Lenders sets parameters for the loans they’re willing to provide. Many lenders won’t lend money secured by cars over 10 years old or with over 100,000 miles. They may also refuse to lend to anyone with a credit score below a certain number (500 or 550 is common). As well, lenders typically will only lend a certain amount, like a minimum of $7,500 or a maximum of $50,000. If your loan is below or above that threshold, you may not be able to refinance.

    Protection products:

    GAP waver policies are specific to the loan they cover, so they will not carry over to your new loan if you refinance. If you still want GAP waver coverage (and we think it can be a smart choice, if you buy it for the right price), you will need to explore your options for a new policy. The good news is that GAP is usually much cheaper outside the dealership. Start by checking with your auto insurance company.

    Refinancing your car not a good fit? Or just looking to save even more? Lower your costs by having BillFixers negotiate your other monthly bills. You’ll keep all the same services for things like TV, internet, and phones, just pay less.

    Is There Any Time Limit to Refinancing My Car Loan?

    You can refinance the day after you bought your car, or two years later. There’s no required timeline. Although the newer your car is, the more likely you are to get a lower rate. The longer you wait, it’s also more likely that you’ll owe less than most lenders’ minimum thresholds or go over their required age or mileage requirements.

    How Do I Refinance My Car Loan?

    The process to refinance online is pretty simple. At Outside Financial, we just ask for a little information about your vehicle (year, make, model, trim, options, and mileage) and about you (including your name, contact info, and income). We’ll search our network of lenders for the best refinancing interest rates available for you without impacting your credit score. Your local bank or credit union can also be a good choice. Most financial institutions provide their interest rates on their websites. (Just keep in mind that the advertised rates are usually the lowest rates they offer, and you may not be eligible for them if your credit isn’t perfect or your vehicle doesn’t qualify).

    If you can decide to move forward with a loan offer, your new lender may need you to provide some documents (like proof of income and your driver’s license). You’ll need to fill out a little paperwork, but they’ll take care of everything else. All you have to do is decide what to do with your savings.

    Sonia is the co-founder and President of Outside Financial. She is a former management strategy consultant and “recovering attorney” with a passion for helping people make sense of their financial lives. She received a BA from the University of Pennsylvania, summa cum laude, and a JD from Yale Law School. She’s written several articles on consumer finance and financial regulation, and she is frequently quoted as an auto finance industry expert in publications such as Forbes, Reader’s Digest, and USA Today. Connect with Sonia on LinkedIn or follow her on Quora.

    You’re being overcharged by thousands of dollars.

    We negotiate for you to get you a better price on your monthly bills. You’ll keep all your same services, but we’ll get you a better price for them.

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