Should you refinance your car in 2024?

Refinance your car in 2024

Considering refinancing your car this year? Whether your circumstances have changed or you’ve simply found a better deal, refinancing your car could save you a lot of money. Read on for all you need to know about car refinancing so you can decide if it’s the best choice for you.

 

Can you refinance a car loan?

Yes! Refinancing a car is a popular option for people who want to swap their current car finance deal for a new one. 

You apply for a new car loan (usually with a new lender) and use this to pay off your existing car finance deal. You’ll then start making monthly payments on the new car finance deal.

 

Why refinance a car?

There are several reasons to consider refinancing your car. It could be that the deal that was right for you at the time simply isn’t anymore. Car finance loans can take years to pay off, and your circumstances might now be suited to a different loan.

Here are some of the main reasons people opt to refinance their cars: 

1. You can get a better interest rate

You may want to refinance your car simply because you’ve found a better deal. You might have improved your credit rating since you took out your existing loan, and now you’re eligible for a better deal with lower interest rates. In this case, refinancing your old deal and paying off less interest on your new one can help you save a lot of money overall.

2. You want to pay less monthly

Another reason could be if you want to pay less monthly. If you're struggling to make your monthly repayments or need a bit of extra cash month to month, refinancing your car can enable you to find a better deal for your current circumstances.

3. You want solo ownership

Refinancing is also a great option if you initially shared a car finance deal with someone (say an ex-partner) and now you want one in your name only. Refinancing your car would allow you to get a new deal in your name only.

4. You want to cover a balloon payment

If you’re at the end of a PCP car finance deal, you’ll need to pay what’s known as a balloon payment to keep the car. This is a lump sum that covers the value of your car and can be expensive to pay off in one go. Refinancing gives you the option of paying this off in monthly instalments. But it’s important to remember you’ll have to pay interest on a new loan.

 

What to consider before refinancing a car

While there can be lots of benefits to refinancing a car, there are a few things to consider to make sure it’s the best option for you.

1. Paying more in interest 

It’s crucial to factor in any interest you’ll pay on your new loan. Especially if you opt to pay less each month on a longer loan term. In this instance, you might end up paying more interest, making a new loan more costly overall than if you stuck with your current deal.

2. Potential fees 

Before you refinance your car deal, be sure to check if there’s an early repayment fee on your existing car finance deal. This isn’t the case for all lenders, but it’s worth checking if it applies to you and factoring this into your calculations.

3. Negative equity

If you’re in negative equity on your car, you might find it harder to refinance it. Negative equity is when your car has depreciated in value, and you owe more on your loan than the car is now worth. When this happens, lenders are less likely to offer you a loan. 

If this is your situation, don’t worry. At CarFinance 247, we work with a trusted panel of lenders who offer negative equity car finance and could find you a deal that you’re happy with. 

 

How to refinance a car loan

So how does refinancing a car work exactly? 

To refinance a car loan you’ll need to provide your new lender some details about yourself and your current car deal. These include:

• Details of your car, including its current mileage and registration number. 
• Details of your current car finance deal, including how much you still owe and the time left on your agreement. 
• Personal ID, and proof of your address
• Bank details
• Employment details

But to begin the process, you can simply get a no-obligation quote. If you’re approved at this stage, one of our friendly account managers will give you a call to discuss your options and help you find the best option for you.

 

Does refinancing a car hurt your credit score?

Like any loan, refinancing your car can impact your credit score initially. But if you keep on top of your monthly payments, your score will go back to normal and may even improve.

If you’re taking out a mortgage or are going through other important credit checks, it’s a good idea to hold off refinancing until afterwards, so the short-term drop to your credit score doesn’t impact this.

 

Conclusion

For lots of people, refinancing a car is a great way to get a better deal than they’re currently paying for their car finance.

Whether you can get a better interest rate now, you want to pay less per month or you want to split the cost of a balloon payment, refinancing your car could be the best option to save you money. In some cases, considerable amounts.

To make the best decision for you, remember to factor in interest rates when you make your calculations and check for repayment fees on your current loan.

Got any questions? Get in touch and we’ll talk you through how to refinance a car loan in more detail and help you get the best deal.