In most cases, you can refinance your vehicle whenever you want. Check with your current loan provider, as it may charge early payoff fees. Vehicle equity must be in line with its loan amount for a refinance, which can prove a problem if you just purchased a new car. Consider your resources and whether an immediate refinance is possible.
Lender Requirements
If your current lender has refinance restrictions or early payoff fees, you'll find the information documented in your loan contract. Call your lender for more information or to find out if additional fees apply. If you financed through a dealership, you may be instructed to wait several months to refinance, although this is usually not necessary. If you refinance soon after using a dealership for financing, the dealer will lose any profit it made from providing your loan. Call your lender directly to find out its requirements; the dealer does not make lender decisions.
Loan-to-Value Issues
An auto loan provider may offer up to 120 percent of your vehicle's bank-determined value for an auto loan, depending on the lender and your credit standing. Some borrowers may obtain as low as a 60 percent loan-to-value ratio. This can become an issue if you just purchased your vehicle as a new car; it becomes a used car as soon as you drive it off the dealer's lot. Additionally, if you financed other items, such as an extended warranty or service plan, you may not obtain an approval for your current loan's total amount.
Down Payment
You may have to provide a down payment for your refinance. If your credit has changed since your original loan, your loan-to-value ratio and approved loan amount may differ from your original loan. Plan ahead for your refinance and decide how much you can offer for a down payment, if any. You may also apply to an auto loan provider to find out if it requests a down payment rather than offer one yourself. Otherwise, you may have to wait until your vehicle's equity and loan amount equal out to avoid providing a down payment.
Credit Issues
If your credit has suffered since you initiated your loan, you may not find a refinance worthwhile because of an increase in interest rate, a shortened term as required by your lender or a down payment requirement. If this is the case, you can apply for a loan refinance with a co-signer, or someone with good to excellent credit who secures your loan. Otherwise, continue paying on your current loan until your credit or financial situation improves.
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