How Interest Rates Work on Car Loans

When is the right time to refinance a car loan? Well, one could argue that it’s never a bad time to consider a car loan refinance. Too many people assume that their auto loan is something they are locked into from the day they finance a vehicle until the end of the loan. But not so! Many people are overpaying on their auto loans, paying higher rates than they’re eligible for, or otherwise stuck with terms that may no longer make sense for their lives. That’s where car refinancing can come to the rescue.So, Is Now a Good Time to Refinance A Vehicle?In terms of timing, it’s always wise to check to make sure you’re not paying more than you need to be. Given that rates and auto values have fluctuated dramatically over the last decade, and that many dealerships mark up prices so you end up paying a higher rate than you were eligible for even at the time of purchase, there’s a good chance you can lower your monthly car payment. And if your life situation has changed, you similarly may be able to save money by refinancing to a better loan for you and your needs. To help you decide if this might apply to you, let’s take a look at some broad guidelines and FAQs for deciding when to refinance your vehicle.When Can I Refinance My Car Loan?Contrary to popular belief, you are not obligated to wait any amount of time before refinancing your car loan. You have to, instead, meet the requirements for the new loan to refinance it. Time is not part of those requirements – you can refinance immediately after buying the vehicle if you want and meet eligibility requirements. Just make sure that you are pursuing a better deal than the one you already have! (That said, in some states, you need your new registration before refinancing, which may slow down the process by 4 to 6 weeks.)If you’re unsure about your eligibility or whether or not the new loan would be better than your existing one, using Auto Approve can help.When Can Refinancing Benefit Me?Refinancing is basically paying off your old loan with a new one. A beneficial refinance could mean a lower interest rate, a lower monthly payment, or both. You may be eligible for a lower interest rate if:Rates have gone down since you financed your vehicleYour credit score has gone up, orYou didn’t get a good deal in the first placeMost auto loans are amortizing loans, which means you pay a fixed monthly payment with interest that is already built into that payment. Lower interest would mean a lower monthly payment, if the terms of the length of the loan stay the same. Some people instead choose to refinance to change the length of their loan, so they pay less monthly but over a longer period of time, or pay more monthly in order to have their loan paid off sooner. Refinancing also allows you to add or drop a co-borrower from the loan and can give you up to three month’s break in payments while the loans change over.When you use Auto Approve to refinance, an Auto Approve representative will help you understand your options and make sure you get the right deal for your unique situation – then do the paperwork for you.Get your free, no-commitment quote today to see how much you could save.How can I improve my credit score? This happens when you make on-time loan payments for multiple months – or years. About 10-12 months is enough time to see a change in your credit score, which you can use as leverage to negotiate a better loan rate. Learn more about credit scores and refinancing here.When Should I Try to Refinance My Car Loan?NOW! Now is always the best time, if you think it might be beneficial to you. The refinance process is simple, there is no risk for you to find out your available options, and in most cases, you will be very glad you elected to move forward. With the right refinance, you can start saving money immediately.In general, the two main reasons why people refinance their vehicles are to lower their monthly payment or lower their interest rate. So if you’re still thinking about timing, consider: whether paying less monthly or overall could help you outwhether your circumstances have changedwhether vehicle values or interest rates have changed The ability to borrow at a lower interest rate means you will pay less for your car after taking all of your borrowing costs into account. Since an interest rate is part of the monthly payment you agree to in the loan, it’s something that you should keep in mind as interest rates change over time. What Do I Need for Refinancing My Car?Generally, you are going to need to collect the following:Information about the current loan and lender, your account numberYour current total loan balanceVehicle information including the make, model, year, and VINRead more about the requirements to refinance a car.Refinancing Mistakes to AvoidHere are some of the most common pitfalls to avoid when refinancing an auto loan:Prepayment penalties do exist, which means you may have to pay extra if you pay off a loan before a term is up. Look up the details of your loan and inquire what this fee is going to be.Waiting too long to refinance. The longer you wait in the life of the loan, the less sense it makes to refinance. Lastly, don’t miss any payments. Even if you think that the refinancing process has paused your payments, triple-check before you halt payment for the previous loan. And that’s An Overview Of When To Refinance A CarSo, when should I try to refinance my car? Start now and discover if you’re eligible! We’re here to help. Hopefully this guide has answered all you burning questions. As always, do your due diligence and call up your lender with questions before you make any decisions. Hidden fees, contractual obligations, and the actual value of the car should all be factored into any refinancing agreements. But, if the stars align, then there is no reason why you should not allow yourself to benefit from auto refinancing. It’s never a bad time to check your options commitment free and discover how much you could lower your monthly payment or your interest rate.GET A QUOTE IN 60 SECONDS

It looks like tariffs – or at least the looming possibility of tariffs – are here to stay. But how do they work? And how can tariffs affect car prices? Let’s take a quick look at everything you need to know about car tariffs: meaning, how they work, and what to expect if you’re hoping to purchase or repair a vehicle.All About Car Tariffs (and How They Could Affect You)Let’s start with the basics.What are tariffs?You may have heard the word a lot lately, but what exactly does “tariff” mean?The simplest explanation is this: a tariff is a tax that is charged on something when it is imported. Think of it like the sales tax on a purchase when you check out at a store. It’s typically a percent of the total you’ve already paid on top of your bill. This money goes, as a tax, to the government.Here’s a practical example of how tariffs work.For example, let’s say you’re a ketchup maker. You live in Kentucky, and cook and bottle your ketchup in Kentucky, but you buy your tomatoes from Italy. You buy your tomatoes from the person that grows them in Italy, then pay to have them shipped to Kentucky. Once your tomatoes arrive in the United States, they’re inspected to make sure they’re safe and legal, and at the same time, you, the ketchup maker who imported them, would pay any required tariffs to the customs officers at the port. See? Just like a tax at check out. Tariffs can be applied by a government in different ways. You can tariff a specific item, items to do with a specific industry, or items from a specific place. They can be broad, blanket tariffs – for example, “all goods from Italy will be tariffed at 15%” – or more complicated and targeted. For example, you could have a rule where, after $1 billion worth of Italian tomatoes have been imported by everyone in the US who imports Italian tomatoes, the tariff percent goes up from 15% to 30%.Worried about rising prices?Here’s one price that doesn’t have to go up: your monthly car payment. Most people are overpaying on their vehicle loan. Auto Approve can help.Get a free quote to see how much you could save.What makes tariffs good or bad?Tariffs themselves are not inherently good or bad. Every country has tariffs on some goods. They can be applied to protect a specific industry – say New Jersey tomatoes were suffering because too many people were importing Italian tomatoes, adding a tax on Italian tomatoes might make it easier for New Jersey tomatoes to get more business. Italian tomatoes would become more expensive. You, as a ketchup maker, might pivot to New Jersey tomatoes to keep your prices the same. If enough people do this, New Jersey tomato farmers will have a more stable industry, and ideally, it’ll have a positive effect on their local and national economy.On the other hand, tariffs can cause problems for importers and consumers. Maybe you’re not willing to change your ingredients and choose instead to raise your prices. Maybe New Jersey tomatoes are more expensive than your Italian ones were. Or, having less competition, New Jersey producers might choose to raise their prices. Situations like these can mean tough decisions for people who make products that use imported goods, and higher prices for consumers. Similarly, say you can get your tomatoes from New Jersey for a better price (yay!), but your ketchup is packaged in Canadian aluminum bottles, and there are no aluminum bottle makers in all of the United States that can make your bottle. The aluminum comes from Canada and there’s no aluminum here to be had. What then? Do you change your packaging and your ingredients all at once? Look for ways to cut costs elsewhere, or simply raise your prices?This is why tariffs are usually used in a targeted way – to avoid hurting companies working inside of a country that have to pay them and to keep consumer prices from soaring.How tariffs affect American car pricesWith all of that out of the way, what does all of this have to do with cars? Well, right now, there are new tariffs being imposed on internationally-made vehicles and auto parts, plus some of the materials used to make vehicles. Will car prices go up due to tariffs?These new tariffs mean it’s likely that consumer costs will go up across the board in the auto industry. Here’s why:Because foreign cars and car parts will simply be more expensive to importBecause not all car parts or materials have domestic replacements availableIt’s easy to see why foreign cars will likely be more expensive. Since the vehicles are manufactured elsewhere, there’s no way to dodge the tariffs by changing to an American supplier. While a motivated company could choose to open an American plant, time and cost to start manufacturing in a new country and source domestic labor, space, parts, and materials might outweigh the benefits, versus simply attaching a higher price tag.But what about American-made cars and trucks?Very few, if any, vehicles are made entirely in America with American parts made from American vehicles. It is common for vehicles to have some parts made or manufacturing done in other countries, and materials like steel may be imported, either in their raw or ready-to-use form. Batteries for electric cars, for example, start with raw materials gathered from all over the world, like cobalt from the Democratic Republic of the Congo, nickel from Australia, and lithium from Argentina, and then are often manufactured in China before being shipped to the United States.Closer to home, auto manufacturing has crossed the border between Michigan and nearby Ontario, Canada, since the car was in its infancy. In 1904, 117 Ford Model Cs were produced in Walkerville, Ontario. General Motors – the Detroit-based manufacturing company that makes Chevrolets, Buicks, and Cadillacs, purchased one of Canada’s early domestic auto brands and used it to found General Motors of Canada in 1918, which is still the company’s Canadian subsidiary. There has hardly been a time when American auto manufacturing was not a cross-border affair – so it’s no surprise that there are still factories making different auto parts or performing assembly on either side of the US-Canada border. That means that tariffs on Canadian-made auto parts may well affect even familiar American automakers.Do tariffs affect car repairs?They can! If you need a replacement part, your costs may go up if that part or the materials used to make it come from somewhere else. If you’re just getting routine check-ups or happen to need something domestically produced, you should be in the clear.That said, not everyone will pass every cost increase directly onto the consumer purchasing that particle part or vehicle. Some may choose to raise all prices a little bit instead of some prices drastically to help spread out the tax burden. How each company or person in the supply chain chooses to handle changes will make a difference for if, how, and when the end consumer is affected.How to save money under new car tariffsThis might make it sound like costs will skyrocket, but there are things you can do to limit how much you feel these changes. First, you can choose to buy American wherever possible – or at least weigh the cost differential and any pros and cons of your options, whether you’re thinking about a new car or just purchasing new tires. While many American-made vehicles will still see some price increase, it’ll likely be less than what you’ll see on vehicles entirely manufactured abroad.Second, you can choose to focus on repairing your vehicle instead of replacing it. While a 25% tariff on a car part might raise its price, 25% of $200 is only a $50 increase, while a 25% tariff on a whole car could be tens of thousands of dollars. If you have the option to hold off and see how things shake out, you can ensure you get the best vehicle for your needs and budget.Be Prepared For How Tariffs May Affect CarsNow you know the basics of how tariffs work and why vehicle costs may be affected. However, in the end, the future can’t be perfectly predicted.Car tariffs are coming into place, but they may ultimately be changed or fine tuned in reaction to the market and industry. These tariffs may not have the predicted effects, depending on a variety of factors. But being prepared for a possible rise in cost is only prudent as the U.S. tariffs cars.Get the best auto loan for your budgetPrices may rise and fall, but getting a better deal on your car payment by refinancing with Auto Approve is just about always a good idea. Discover whether you’re eligible for a lower monthly payment in a few clicks – no commitment required.Get your free quote now.

Spring is a great time to think about making changes and refreshing your life – from spring cleaning to getting outdoors more. But it can also be a great time to check in with your finances. Right now especially, money is tight for a lot of average folks in the U.S., thanks to rising grocery and gas prices. If you have a car that is financed, you may be wondering whether a car loan refinance could help you save some cash. Here’s how you can tell if you should refinance your car loan in 2025. What is car loan refinancing?Car loan refinancing is when you get a new car loan that will replace your existing loan. Refinancing a loan will help you to get a better interest rate, change your repayment period, and change who is or is not a cosigner on the loan.When you refinance your loan you will go through the same process as you did during your initial financing. You will research lenders, apply for a loan, and select the loan that has the best terms, conditions, and car loan interest rate. And that’s it! It’s incredibly simple, and there are companies out there like Auto Approve who can help you navigate the world of refinance and help you through the application process. When you select a loan that is right for you, your new lender will pay off your old loan directly and you will begin making payments to your new lender. And voila–your loan is refinanced and you can start saving money immediately. When should you refinance your car loan?There are a number of signs that the time is right to refinance your car loan. Make sure you know the terms and conditions of your existing loan before you decide whether to refinance, as it’ll help ensure that the new loan you get will be better.Your credit score has improved.The car loan APR that you are offered is very dependent on your credit score. In fact, your credit score is the biggest factor that you have control over when it comes to securing a loan. The rate that you are offered will be based on which credit tier you are in. Your credit score will fall into one the following categories:800 to 850: Excellent740 to 799: Very good670 to 739: Good580 to 669: Fair300 to 579: Poor In general, you will be offered a good car loan interest rate if your credit score is in the very good or excellent range. As your score decreases, the interest rate that you will be offered will increase. Your credit score is based on five key factors in your personal finance: your payment history, credit utilization, length of credit history, credit mix, and new credit accounts. There are many reasons why your credit may have increased since your initial financing:You paid off some debt.You have been making consistent on time payments.Your available credit increased.You had a negative event expire.And more.Any improvement to your credit score can help save you a lot of money in interest, especially if it bumps you into a different category. But in general, if there has been an increase to your credit score, it is a good idea to think about car loan refinancing.The market rates have decreased Or Your Original Rate Was Higher Than Necessary.The refinance rate that you will be offered will be based in part on the current market rates. If the current rates are lower than they were when you initially financed your car, you may be offered a lower car loan refinance rate.Many people find that, even if little has changed in terms of their credit or the market rates, they may be able to pay less if they financed initial with a car dealer. Dealerships frequently mark up the market rate, so the financing received through them might not reflect the best pricing available to you. That’s why it’s always a good idea to check whether you could lower your rate – even if you don’t decide to move to the next step and refinance.You want to change your repayment period.Another benefit of refinancing is that you can change your repayment period. There are two ways that this can help you: it can either save you money in the longterm or buy you some breathing room in your monthly finances. If you shorten your repayment period, you will be paying off your loan quicker and you will therefore spend less money overall on interest. This will make your monthly payments higher, but you will save money in the long run. On the other hand, if you are having trouble making your payments every month, lengthening your repayment period will allow you to reduce your monthly payments. Since you will be paying the loan off over a longer period, the principal will stretch out and easily cut your payment by hundreds per month. You will likely be paying more interest over the life of the loan, but this may be worth it if it can make your monthly budget work for you. In general, if something big is happening (like a wedding or a personal emergency) and you need a little breathing room, refinancing may be a help – as well as lowering your monthly rate or overall interest, refinancing often means a few months’ break from paying while you make the switch.You are in a bad relationship with your current lender.Sometimes we end up in bad relationships. Maybe you don’t like the customer service and have had a few too many bad interactions. Maybe they have hit you with fees and penalties that you do not find fair. Maybe they have been unresponsive and unhelpful. Whatever the reason is, refinancing your car loan can help you get out of a bad spot with your current lender.You want to add or remove a cosigner. If you want to add or remove a cosigner from your current loan, refinancing your loan is going to be your best option. What do I need to refinance my car loan?In order to refinance your loan, you will need to have the following documents: Proof of employment or income (a paycheck stub or tax return)Proof of car insurance.A valid driver’s license.Proof of residence. This is required if your driver’s license and credit report address don’t match. A utility bill is usually sufficient for this.  Your car’s registration.Your vehicle’s information: model, make, year and vehicle identification number (VIN)Your current lender’s information and loan information, including the payoff amount.A photo of your car’s odometer Some lenders may require more information or paperwork, but these are the standard documents that most lenders will want. Is 2025 a good time to refinance my car loan?So is now a good time for car loan refinance? It really depends on your situation. Market rates are not exceptionally low, but they have fallen a bit since their peak in 2023-24. But more importantly, global circumstances might not matter for your unique situation. The rates might be lower than when you originally financed, or you might be eligible for a better interest rate than you were previously.  The best thing you can do is to look at your finances and determine if you could benefit from car loan refinance. Additionally, the rapidly changing car tariff situation makes planning to purchase a new car a bit confusing right now, so those who have the option to hold onto a vehicle a little longer rather than worry about car prices might be wise to do so – for example, if you’re thinking about an auto lease buyback. That’s how you can know if car loan refinancing is right for you in 2025. Think a car refinance might be right for you? Get your free, no-commitment quote from Auto Approve today to find out how much money you could be saving!GET A QUOTE IN 60 SECONDS