How Quickly Can I Refinance My Car Loan After Financing with a Dealership?

Sep 05, 2023
Learn when it is a good idea to refinance your car loan after getting financing from a dealership

Sometimes fast-paced car salespeople get potential buyers overly excited and entice them to make a purchase that doesn’t serve their best financial interests. When this happens, more than a few people ask,“how soon can I refinance my car?” Before making another quick decision, it’s crucial to consider how refinancing your car loans works and the potential short- or long-term benefits. If you got carried away at a car dealership, there are some things to consider before refinancing your car with a local lender.

If I Refinance My Car, What Are The Benefits?

Car buyers who are not necessarily thrilled with the interest rate they received on their car loan often want to refinance. But inexperienced borrowers may find the idea of “refinancing” somewhat ambiguous. It’s essential to understand that the refinancing process involves qualifying for a new car loan that pays off the existing one that was originally closed at the dealership.

When someone contacts a local lender and says, “I want to refinance my car,” there are car loan products designed to accommodate them. The goal is to work within the framework of a person’s credit score, repayment history, debt-to-income ratio and find the best loan available to refinance their vehicle. Refinancing a vehicle routinely delivers the following benefits.

  • Improved Interest Rate: Interest rates offered at the car dealership may not always be the lowest possible option. Car buyers sometimes get caught up in the excitement of driving away with a new vehicle and take the rate offered. Refinancing a car through a local lender after conducting some due diligence commonly results in paying less interest over the life of the loan.
  • Reduce Length of the Loan: People who are a couple of years into a truck, SUV or car loan may want to reposition their long-term financing priorities. Working families may be saving to purchase a home and need to clear up outstanding loans. When your goal is to improve your credit score and debt-to-income ratio, refinancing a car loan can prove effective. By selecting a finance option that shortens the length of the loan by modestly increasing monthly premiums, you can get it paid off sooner.
  • Increase Length of the Loan: It may sound counterintuitive, but the reverse financial planning may also support buying a home. When you check the boxes for things like good credit scores, employment history, and others, securing a mortgage would appear seamless. But when the debt-to-income ratio doesn’t quite sync with other financial aspects, sometimes lowering your monthly car payment can help you qualify or gain a lower interest rate on the purchase of a home.
  • Add GAP Coverage: Consumers are usually offered optional GAP Insurance, also called Guaranteed Asset Protection coverage when they buy a new or pre-owned vehicle. This protection pays the difference between the car’s value and the amount owed on the loan. It’s common for automobiles to depreciate quickly and, in the event of a wreck or theft, the victim sometimes has to pay that difference out-of-pocket. Qualified borrowers can include GAP Insurance when refinancing their car loan.

Along with these benefits, refinancing options typically open doors to manage loans online, schedule automatic payments, and speak directly with a loan professional at a trusted local lender. The benefit of speaking with a real person when life presents an obstacle proves invaluable.

How Long Do I Have To Wait Before I Can Refinance My Car Loan?

Recommended wait periods vary depending on the specific situation. Some resources claim that borrowers must wait at least 60-90 days because of vehicle title transfer delays. That advice has little to do with securing the financial benefits of refinancing a vehicle. Some sources indicate six months, and yet others assert that borrowers should never refinance until at least 12 months has elapsed.

The underlying problem with these and other financial planning opinions is that they fail to consider your unique circumstances. Perhaps a better plan would be to speak with a local lender about refinancing options and identify when the best time to refinance your car loan will present itself. By speaking directly with a lending professional, you’ll be better equipped to make a more informed decision. If you got something of a raw deal due to excitement and an impulse buy, it may be in your best interest to refinance your auto loan sooner rather than later.


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When Does It Make Sense To Refinance My Car Loan?

There are many reasons to consider refinancing a car loan that make good financial sense. Saving money ranks among the most prevalent reasons people refinance, followed by reorganizing monthly expenses, and planning ahead. Although achieving these and other goals supports an improved comfort level, it may be worthwhile to consider the following questions.

  • Will refinancing my car loan successfully reduce monthly payments and put extra cash in my pocket?
  • Will refinancing my car loan reduce the interest I would pay over the life of the loan?
  • Will refinancing my car loan position me to get debt-free sooner?
  • Will refinancing my car loan create long-term financial planning opportunities?

If the answer to these or other questions is “yes,” it may make sense to ask about car loan refinancing options sooner rather than later. It’s essential that the timing and loan you secure makes sense in terms of cost-effectively achieving your personal and financial goals.

What Potential Problems Could Happen By Refinancing My Car Loan Early?

Let’s consider a scenario in which a hard-working individual went car shopping and just fell in love with a new vehicle. Swept up in what amounts to an impulse purchase, they reveled in the way the car handles, its next-gen technology, and the new car smell. But when the first monthly car payment comes due, they experience significant buyer’s remorse.

At one time or another, most of us have allowed our emotions to get the better of our wallets. What sometimes happens next involves another impulse. This time it’s a driving desire to overturn the mistake of accepting financing at the car dealership that is less than pleasing. It’s never a good idea to make knee-jerk decisions about refinancing a car loan too early. Taking steps to lower monthly payments without much research can result in paying additional interest over the length of the loan. Sometimes people who rush to refinance are willing to pay excessively high fees or prepayment penalties (if they apply) to regain their monthly expense comfort.

The problems that result from refinancing too early often involve emotional decisions. By working with a trusted lending professional who provides full refinancing transparency, worried car buyers can catch their breath and make level-headed decisions.


How To Decide If Now Is The Best Time To Refinance My Car Loan?

The seemingly endless car refinancing information and options often prove overwhelming. The truth is that we all have unique lifestyles and goals that don’t fit into a one size fits all solution. Doing the math on refinancing your car loan involves strategic planning, timing, and working with trusted local experts who can help you land on the decision that’s right for your finances.

Take the first step to see if now is the right time to refinance your car loan. Run your original loan amount, rate, loan term and the number of remaining payments through our car refinance calculator. If you’re ready to refinance, apply for a Finex Credit Union car loan today, or contact us if you have questions about your unique financial situation.

If the answer to the question "How quickly can I refinance my car loan" makes refinancing seem like the wrong choice, it may be time to swap your ride. Review our, "review our "Car Loans 101: Car Buying Made Easy"

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