Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace

Back to the budget brink

Jul 18, 2019

Latest Episodes

Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Ask Money

Refinancing auto loan

Chris Farrell Aug 11, 2010
Share Now on:

Question: Is it possible to refinance an auto loan (I believe it is currently about 9.5%) if we were “upside down” going in to the purchase? Terri, Thiensville, WI

Answer: You might be able to refinance the loan at a lower rate. But since you owe more than the car is worth you’ll probably have to fork out the difference before a lender will consider refinancing your loan.

You should also make sure that your auto loan doesn’t have a prepayment penalty clause. It’s important to shop around for a refinancing deal.

It goes without saying that I would run the numbers carefully to see if you come really out ahead. For example, Bankrate.com has an auto refinance calculator.

My basic approach is to be skeptical about the economics of refinancing an auto loan. But a lot of people are looking into it these days with money is so and interest rates so low. It’s a way to trim monthly expenses. As a general guideline, lenders like to work with customers that own newer cars, say, 5 years or less. The loan shouldn’t be upside down. Lenders like customers with big loans, too, running into the several thousands of dollars.

That said, here’s my basic problem with this tactic. It’s going to cost you more in the long run. Taking advantage of the decline in interest rates won’t save most owners much on the loan. The real break on monthly payments comes from extending the life of the loan. You’ll end up paying a lot more for that depreciated vehicle.

If you’re a member of your local public radio station, we thank you — because your support helps those stations keep programs like Marketplace on the air.  But for Marketplace to continue to grow, we need additional investment from those who care most about what we do: superfans like you.

Your donation — as little as $5 — helps us create more content that matters to you and your community, and to reach more people where they are – whether that’s radio, podcasts or online.

When you contribute directly to Marketplace, you become a partner in that mission: someone who understands that when we all get smarter, everybody wins.