The Rising Cost of Car Loans
Over the last decade, the rising cost of new and used cars have driven up the amount of the average car loan. Auto lenders have started offering longer car loans, allowing consumers to borrow more with a lower monthly payment. The average new car loan worked out to $32,187, with the average used car loan at $20,137, and loan terms extending to more than 68 months for new cars and almost 65 months for used cars.
Refinancing Your Auto Loan: Pros
Refinancing your car loan could secure a lower monthly payment you can more easily afford. With a lower monthly payment, it might be easier to stay on top of your living expenses and other bills. Another advantage of refinancing is the potential to qualify for a lower interest rate, thereby saving you hundreds or even thousands over the life of your loan.
Refinancing Your Auto Loan: Cons
Refinancing your car loan may result in paying on your loan for months or years longer than you would have otherwise, which can create unintended financial consequences later down the road. Those with used cars need to consider the possibility of expensive repairs on an older vehicle. Moreover, refinancing could mean more interest paid over time, even if you get a lower rate. Lastly, refinancing your car loan usually involves fees, such as application and origination fees, as well as an auto lien transfer fee.
Deciding on Refinancing Your Auto Loan
It’s important to weigh the pros and cons of refinancing your car loan. Compare auto refinancing offers from at least three different lenders, run the numbers with an auto loan calculator, and consider both short-term and long-term costs. Making an informed decision will improve your chances of finding a new auto loan that leaves you better off financially.