Auto Loan Refinancing?

Hi SL, it's possible to refinance a new car as long as you're reducing your debt burden by doing so.



Well, the lender may. In fact, it would be wiser for you to apply for a refinancing loan greater than your existing outstanding on the car. The extra amount then can be used for other purposes, like-in your case paying-off high interest cards. But, before refinancing the car, you have to keep in mind that whether you are managing a better deal or not.

There are finance companies out there that will refinance a vehicle for you.

Keep in mind, however, that when they calculate loan-to-value, they don't go by the retail value of the vehicle. Lenders will gauge your car's worth by pulling it's Black book (wholesale) value.

I haven't found any public websites that will show black book value. But if you go to Kelly Blue Book (kbb.com), look up your car, click on "trade-in value", and mark it up in "good" condition (lender's won't ever consider it excellent) ..... Wholesale value actually comes out a bit less than trade-in, but this will give you a good idea what a lender thinks your car is worth.

All lenders are different, they have different approval policies. How much they approve will depend on how much they will leave themselves "unsecured" (amount of loan less it's worth).

Some companies also leave themselves a "buffer". For example, I always make approvals that are $1500 under book. That means if a customer wants a loan and their car is worth $10K, then the most I will approve is $8500. The reason for this lies in the potential for losses when realizing on the collateral -- that $1500 buffer means the car can get a few dings and scratches over the life of the loan, but still resell for the full loan balance.