When Should I Refinance My Car Loan?

First Republic Bank
January 6, 2022

The steady decline of interest rates across the auto loan market over the last year, and the opportunity to cut down your monthly car payment, likely has you thinking about refinancing your current auto loan. Even if your current payments are well within your means, you may be evaluating any number of available financing options to help you balance your auto needs with your other financial goals.

Fortunately, there are flexible financing tools that can be used to refinance your car while providing access to funds for other expenses — including personal lines of credit and personal loans.

First Republic’s Personal Line of Credit – access funds with fixed rates from 2.95% APR (with discounts)1.

While comparing the different lenders and refinancing solutions is critical, figuring out when to refinance your car loan is equally important.

In this article, we will go through the key benefits and considerations to keep in mind before you begin the process of refinancing your car loan.

Benefits of refinancing a car loan

As you begin researching your auto loan refinancing options, you can generally focus on the following three benefits:  

  • Lower interest rates: Based on the terms of your new lender, you may be able to secure a better interest rate when refinancing your car loan.
  • Lower monthly payment: Having lower monthly payments can offer you the flexibility to focus on other financial needs beyond your auto loan.
  • Flexible payment terms: Depending on your new lender, you may take advantage of flexible payment terms that may better suit your financial goals.

While each of these factors may vary based on your individual financial circumstances, they can help guide you as you research lenders and decide on the right time to start the refinancing process.

Factors to consider before refinancing your car loan

As you evaluate lenders and available financial solutions to refinance your auto loan, it’s important to consider these variables:

  • Interest rates: If refinancing could offer you lower interest rates so you’re paying less in the long run, it might be time to make the leap. When comparing your options, make sure you understand the difference between APR and interest rates.
  • Creditworthiness: An excellent credit score, along with a history of making timely payments on your original loan, shows potential lenders that you are reliable and trustworthy, which may allow you to access favorable rates and loan terms.
  • Income: If you’ve recently experienced a change in income, you may benefit from lower monthly payments and/or more favorable loan terms.
  • Prepayment penalties: Make sure to check with your lender for any prepayment penalties or other loan fees.
  • Other financial goals: If you have multiple loans in addition to your car loan, you may benefit from combining them all into one single monthly payment by refinancing with a personal line of credit. 

Final thoughts

When it comes to making a large financial decision, timing can be everything. As you evaluate your options, it’s crucial to thoroughly weigh the pros and cons of each solution before initiating your car refinancing process. The considerations outlined in this article can help you take stock of your current financial situation and determine the best time to refinance your car loan.

How can First Republic help?

First Republic's Personal Line of Credit is a flexible line of credit that can help you address a range of financial needs – including buying or refinancing a car, refinancing student loans, funding minor home improvements and much more.

First Republic’s Personal Line of Credit offers access to revolving credit during a two-year interest-only draw period with no origination or prepayment fees.

Unlike a traditional auto loan, Personal Line of Credit is an unsecured loan. That means, you own the title of your vehicle and aren’t required to add First Republic Bank as a lienholder on your vehicle’s title.

Note: If you are looking to purchase a car using our Personal Line of Credit (versus refinancing an existing auto loan), we suggest you obtain the Personal Line of Credit first, before making the final purchase at the dealership.

Curious what a Personal Line of Credit would look like for you? See your available rate and term options using this personal line of credit calculator.

First Republic’s Personal Line of Credit – access funds with fixed rates from 2.95% APR (with discounts)1.

1. Annual Percentage Rate. Rates effective as of 05/02/2022 and are subject to change.

If the Account is closed, the rate will increase by 5.00%. Rates shown include relationship-based pricing adjustments of: a) 2.00% for maintaining automatic payments and direct deposit with the Account, b) an additional 0.50% for depositing and maintaining a deposit balance of at least 10% of the approved loan amount into the Account, and c) an additional 0.25% for depositing and maintaining a deposit balance of at least 20% of the approved loan amount into the Account, with the option to deposit up to half of that 20% into an Eagle Invest account.

Banking products and services are provided by First Republic Bank, Member FDIC and Equal Housing Lender

Eagle Invest is an investment advisory service offered by First Republic Investment Management, Inc., and sub-advised by BlackRock FutureAdvisor, Inc. (FutureAdvisor). First Republic Investment Management, FutureAdvisor and Fidelity Investments, Member FINRA/SIPC, are unaffiliated SEC-registered investment advisors. FutureAdvisor is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. $5,000 minimum investment required.

Investment Advisory Services are offered through First Republic Investment Management, an SEC-Registered Investment Advisor and a wholly owned subsidiary of First Republic Bank.