Used Car Refinancing

Written by Jeremy Horelick
Bookmark and Share

There's no reason why consumers shouldn't refinance their used cars in order to free up extra cash for other purposes. Traditionally, drivers refinance their new cars when interest rates drop so that they may lessen their monthly payments. But just because used cars are, on the whole, less expensive than new ones doesn't mean that they too aren't frequently financed.

Instead of buying a new Honda or Toyota that's known to be fuel efficient and reliable, lots of people choose to put the same money toward a used BMW or Mercedes. Luxury cars such as these are all too frequently financed, often by the very dealership that's selling them. It's not uncommon for buyers to opt for dealer financing simply out of convenience. They're already sitting there in the office, so why not hear the financing pitch as well, right?

You Can Do Better

Even if you're only on the market for a 10,000-dollar used automobile, you can wind up saving yourself hundreds of dollars if you're selective about your financing. After shopping around for a few weeks, you may discover that you can do much better than the 19 percent you're currently paying. You may find a lender who's willing to pay off your loan and assume your debt at 14 percent instead. Just look at how this plays out over the course of a two-year loan.

A 19-percent rate on a 10,000-dollar loan comes out to 3,800 dollars worth of interest over the course of two years. At 14 percent, however, you pay only 2,800 dollars for a difference of a grand. With that thousand dollars you could, among other things, decide to pay off an entire credit card, open an IRA, or invest in a mutual fund. Or you could always spend it on a pressing need such as home repairs or a new suit or dress.

Bookmark and Share