As with any situation involving borrowing money, important factors exist for you to consider first. Car refinance rates are meant to save you money both short and long-term. The type of APR assigned to your refinanced loan plays a big role in determining how much you will save. APRs are either fixed or variable and each one has its pros and cons.
A fixed APR maintains its rate for the entire life of your loan or until you refinance it again (if applicable). A variable APR might start out at a fixed rate, but eventually fluctuates up and down with market variations.
A fixed APR gives you peace of mind, knowing your rate will never increase or cause you to have to make higher monthly payments. When fluctuations occur in your favor and APRs are lowered across the market in general, however, you lose the benefit of paying less interest because your loan APR is fixed. Yes, it is obviously possible to refinance your auto loan. However, it might not be worth it in the end if market changes are minimal and closing costs and other fees on your refinance loan are high.
Still, most borrowers prefer the consistency of a fixed APR and simply seek to obtain the lowest available rate when taking out a car loan initially.
Variable auto loan refinance rates cause fluctuations in your monthly payments in addition to making the total amount of interest you will eventually pay unpredictable. Most auto loans do not charge variable APRs, which are mostly assigned to home mortgages, corporate bonds and revolving credit card accounts. Variable APRs are assigned to personal loans, however, which are sometimes used to purchase vehicles. The main benefit of a variable APR is the possibility it creates for saving money if market fluctuations average below the fixed APR you might have accepted. The possibility therefore conversely exists where you end up paying more over the life of the loan as well.
Auto refinance loans are useful if you are experiencing sudden financial hardship and need to create financial breathing room. Some auto refinance loans include cash-out options, which allow you to add money to the loan for home improvements or other personal expenses. Lower monthly payments help you save up for vacations, college tuitions or eventual long-term healthcare stays. Credit unions are often secret weapons when searching for the lowest auto refinance rates on the market today.
Still, many online lenders and local banks have auto refinance loan programs worthy of thorough research and time spent comparing rates to get you the best money-saving deal possible.