Are you a good candidate?
Thanks to today's low interest rates, anyone who purchased and financed a car a few years ago could potentially find an auto loan with a lower rate. A few general guidelines:
A. Is your current interest rate significantly higher than what you could get it for today?
In the fourth quarter of 2008, a 48-month new auto loan issued by a commercial lender averaged 7.06%. Today, the average rate on a 36-month used-car loan is 5.47%, according to Bankrate. And the average rate on a 48-month new car loan is 4.89%.
B. Has your credit score improved?
You could save even more if your financial situation has changed for the better - and your credit score is higher - since you took out that original car loan.
As with any loan, you do need good credit to qualify for auto refinancing. However, the criteria is far less stringent than that associated with home loans, says Reed. According to FICO (the company that calculates the widely-used FICO scores), you need a FICO score of 720 or more to qualify for the best auto loan rates. On a $25,000 36-month loan at 4.784% (the national average as of March 30, 2011), your monthly payment would be $747. On that same loan, you'd have a $828 monthly payment if your FICO score was between 620 and 659, which would put you at an average 11.762% interest rate, according to FICO.
C. Are you in a lengthy loan (five- to eight-year term)?
Jack Nerad, executive editorial director and market analyst for Kelley Blue Book advises anyone in a lengthy auto loan (with an original five- to eight-year term), to research auto refinancing.
Many people only pay attention to their monthly payment when purchasing a car and have no idea how much of that payment is interest. The longer the term of the loan, the more interest you'll fork over to the bank until it's paid off, even if your monthly payment seems low. Refinancing into a loan with a shorter term will lower the total amount of interest you'll pay, even if it doesn't considerably lower your monthly payment.
Contact us today to learn about the latest auto finance offers including lease and finance specials for new Chevrolet, Buick, GMC, Cadillac, Chrysler, Dodge, Jeep, RAM, Toyota cars, trucks, and SUVs at Desert Sun Auto Group.