Candice Choi

Unlike redoing mortgages, refinancing a car loan is quick, easy, and profitable

By Candice Choi
Associated Press / August 28, 2010

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It’s easy to overlook the cost of auto loans. Yet rates on auto loans have edged lower. And car buyers who didn’t get the best terms in the past year or so can refinance their loans.

Remember, dealers typically mark up the interest rates they get from lenders to make money. Dealers are leaning more heavily on auto loans for profits as shoppers get savvier about researching car prices online.

That means refinancing could bring significant savings. Here’s a rundown:

■ How Does It Work? It’s easier and cheaper than refinancing a mortgage. There’s no need for an appraisal, and borrowers can usually find out if they’ve been approved within an hour of applying online.

If you accept an offer, the lender will need some paperwork to complete the process. This will include copies of the car’s title and registration. Once the paperwork is in hand, the new loan can be refinanced in a day or so.

Be mindful of fees. There will be charges to transfer the title and reregister your car. These fees vary depending on the lender and where you live, but the total cost shouldn’t exceed $25 in most states.

Unlike with refinancing a mortgage, the cost of refinancing an auto loan is rarely a deal breaker.

■ Who Can Refinance? Lending standards remain tight. But if you qualified for a new car loan in the past year or so, refinancing shouldn’t be a problem.

Don’t be discouraged if you’ve been late on a few payments, as long as your overall credit profile hasn’t deteriorated.

The standards vary but lenders will have certain requirements on the car’s age, mileage, and other terms.

The specific rates you’re offered will depend on your credit score.

Average rates right now range from 5.7 percent for those with the best credit scores (720 and above) to 18.5 percent for those with poor scores (below 590).

To start scouting what terms are available, go to comparison sites such as or If convenience is important to you, it’s also worth checking the rates at the bank or credit union where you already have accounts.

■ Anything Else? Don’t confuse a refinancing with a loan modification. The latter is when you renegotiate the loan terms with a current lender. The Better Business Bureau last month warned that people pushing auto loan modification scams have been preying on borrowers around the country.

Consumers reported paying hundreds of dollars in fees with the expectation that the companies would be able to lower their monthly car loan payments. The BBB says consumers complained that they could not get their money back, even though the terms of their loans were not modified.

Candice Choi writes for the Associated Press.