After one year of making payments on my auto loan, I decided to explore the possibility of saving money by refinancing. What started as a casual inquiry into interest rates quickly turned into a crash course on navigating auto refinance offers and determining their true value.
I reviewed the best auto loan refinance options available and selected a direct lender, Ally, as well as two loan aggregators, Caribou and Gravity Lending, to provide me with multiple refinance offers for comparison. My objective was to reduce both my monthly payment and interest rate on my 2020 Subaru Ascent, for which I had already made 14 payments on a 60-month loan.
It’s important to note that I did not urgently need a new loan, as I was still able to afford my original loan payments. Additionally, I have good credit, so the rates discussed in this article may not be attainable for everyone.
Here are the key insights I gained from my refinancing experience:
Pre-qualification interest rates may be 1-2% higher than actual offers due to the limited information provided during a soft credit check. Offers from Caribou and Ally ranged from 6.09% to 7.69% APR, but improved after a hard credit inquiry and more detailed financial information were provided.
Lenders may attempt to sell unnecessary protection plans, such as extended warranties, which can significantly increase monthly payments without adding real value.
Offers presented as monthly savings may not accurately reflect the true cost of the loan, especially when additional fees are included in the total amount borrowed. Utilizing tools like BW’s auto loan refinance calculator can help identify discrepancies between advertised savings and actual outcomes.
Gap insurance purchased with the original loan may not carry over to a new loan, potentially leaving the borrower exposed in the event of a total loss.
Overall, my refinancing experience taught me the importance of thoroughly evaluating offers, understanding the true cost of a loan, and utilizing helpful tools to make informed decisions. I had assumed that gap insurance would transfer or be included in the refinancing quotes, but I was surprised to learn that I would have to add it onto my new loan if I wanted to keep the coverage. The loan officer at Gravity Lending informed me that my monthly payment would increase if I added gap insurance, as it ends when the new lender pays off the current loan during the refinancing process.
I ultimately decided not to refinance my auto loan because the fees associated with the lower interest rates offered by Caribou and Gravity Lending would have canceled out any potential savings. Despite being a good candidate for refinancing due to an improved credit score and the timing of my vehicle purchase, I realized that my current loan had a decent rate and that I had negotiated favorable terms with the dealership when I bought my car. This made me hesitant to refinance and potentially end up paying more in the long run. following sentence:
The quick brown fox jumped over the lazy dog.
Rewritten sentence:
The speedy brown fox leaped over the lethargic dog.