People refinance their vehicles for a number of reasons. Interest rates may have dropped since they bought the vehicle, and they may want to decrease their monthly payment. Others may have bought vehicles when their credit rating was poor. Now that their credit rating has improved, they qualify for a better interest rate. People who lease vehicles may find that they want to keep the vehicle at the end of the leasing terms. This is not a traditional refinance, but the process is the same. Some consumers neglect to shop around for an interest rate, and find out later that the dealership gave them a bad deal. If you find yourself in any of these situations, take comfort in knowing that refinancing an automobile is a simple, quick and relatively painless process.
Carefully read your current loan documents. Before you embark on an auto refinance, make sure that your current loan does not include a prepayment penalty. Most auto loans these days do not carry such a penalty, but a few do. If yours carries a prepayment penalty, find out exactly what the penalty will be, so you can factor this added expense into your decision-making process.
Shop for loan rates online. You will save yourself a lot of time by doing so. You can begin by going to your bank's website and seeing what kind of rates they offer. Sometimes, they will give an added discount to current customers.
Ask about loan and title fees. These are sometimes hidden in advertisements and even online information, but they can add up and eat up your savings. Ask potential lenders to be explicit about their extra fees.
Use an online calculator to compare loans. Remember to include loan and title fees in your calculations.
After you have compared loans, make a decision and fill out paperwork. There may be additional state paperwork and re-registration fees, depending on where you live. Your lender will provide you with all documents.
After closing on the loan, follow up with your new lender to make sure that everything is taken care of. It is your new lender's job to pay off the old loan. The car's title will be transferred to your new lender.
Begin making monthly (and hopefully smaller) payments to your new lender.