How to Refinance an Auto-Loan Rate

How to Refinance an Auto-Loan Rate


Research current auto-loan rates. Online companies (See Resources.) allow you to compare rates from financial institutions across the country. This will give you a quick resource to determine if your local lender is providing a competitive rate.


Determine your term. Often times, financial institutions will offer a better rate on shorter loan terms. For example, a loan term of 48 months may have a rate 1 to 2 percent lower then a term of 60 or 72 months.


Ask for relationship discounts. For example, if you have a mortgage, checking account and auto loan with a lender, the lender may provide a discount on the auto loan refinance. This discount may range from .25 percent to .5 percent.


Compare refinance fees. Small fees add up quickly. Watch out for application fees and processing fees. If your lender charges these fees, ask about waiving those items; especially if you've been a loyal customer.


Negotiate your auto-loan rate. Financial institutions know that it's more expensive to acquire new customers versus retaining current customers. If you find a better auto- loan rate, talk with your lender. Often times, they'll do a "rate match" to retain your business. In most cases, you'll need to talk with the financial institution manager, who has more flexibility to negotiate.

Tips and Warnings

  • Understand your credit score. When refinancing your auto loan, it's important to get the best rate possible. With most financial institutions, your credit score will dictate if you have access to the best rates possible. You can get a free credit report every year (See Resources), and you'll have to pay a nominal fee to get access to your credit score. Review your credit report, and if you find inaccuracies, contact the reporting agency (Experian, Equifax or TransUnion) and file a dispute form. Getting rid of incorrect information may boost your credit score.
  • Read your contract carefully. Make sure there aren't any fees associated with paying off the vehicle early.
  • When auto-loan rates drop, refinancing can save you money on interest payments and lower your monthly payment. However, before refinancing your auto loan, it helps to have a few tips. That's because many financial institutions will negotiate to retain your business and even provide relationship discounts. Taking the extra time to research rates and approach your current lender can pay off.