When you decide to refinance your car, your goal is most likely to save money (although there are other reasons people choose to refinance). And while there are many factors that affect the car loan APR you are offered, the current auto refinance rates are a huge contributor to the APR you will be offered. So what are the current refinancing rates for cars in late January 2023?
Here are the current refinance rates for cars in January 2023.
What factors go into refinancing a car?
When you refinance a car, there are several factors that will determine what car loan interest rate you are offered. Lenders will consider the totality of your application when determining the appropriate APR for your car loan.
Your credit score
Your credit score is an indicator of how likely you are to pay your loan back in full and on time. This is one of the most important factors that lenders will consider when calculating your car loan interest rate. Your score will fall into one of five brackets:
740-799: Very Good
The best refinance rates are reserved for those with excellent and very good credit. If you have poor credit you may have a very hard time finding a reasonable car loan APR rate, or getting approved at all. There are certain lenders that deal with those who have poor credit, but they typically have very high interest rates and strict penalties. That is why it is always a good idea to work on your credit score before applying for car loan refinance to give yourself the best rates possible.
Lenders will also pay careful consideration to your income to ensure that you have the means to repay the loan. Lenders will look at your pre tax income to determine if you can afford the loan you are seeking.
Your debt to income ratio
In addition to just your income, lenders will consider how much your income compares to your debts. If you owe a lot compared to how much income you have, lenders will feel like you are overextending yourself. The lower your DTI is, the more likely you are to be approved (and for a better refinance interest rate). Your DTI should be below 40%, but you may still qualify if your ratio is up to 50%.
Lenders will also look at the car that you are refinancing when determining if you qualify and the refinance rate. They will consider the make, model, age, trim features, and mileage. They want to ensure that the car they are loaning money for is worth the money. In other words, if the market value of the car is less than the loan value, they might not see the value in refinancing it. If you default on the loan, they want to ensure they can sell your car and recuperate any losses.
What is the current refinance rate for cars?
While the car loan APR you will be offered will be based on the above factors, it will also be based on the market rates. While car refinance rates are not as sensitive to fluctuations in the economy as much as some other interest rates, they are still very much affected by the current economic conditions.
So what are the current refinance rates for cars? As of late January 2023, the current car loan refinance average rates are:
If you have a credit score between 750-850:
- 4.67% for a 36-month loan
- 5.55% for a 48-month loan
- 5.68% for a 60-month loan
- 6.15% for a 72-month loan
If you have a credit score between 700-749:
- 6.48% for a 36-month loan
- 7.15% for a 48-month loan
- 7.05% for a 60-month loan
- 7.16% for a 72-month loan
If you have a credit score between 640-699:
- 8.03% for a 36-month loan
- 10.11% for a 48-month loan
- 9.81% for a 60-month loan
- 9.84% for a 72-month loan
If you have a credit score below 639:
- 11.84% for a 36-month loan
- 13.27% for a 48-month loan
- 13.43% for a 60-month loan
- 13.35% for a 72-month loan
*Note that all of the above interest rates are averages from rategenius.com
As you can see, it is incredibly beneficial to have a good credit score. Those with excellent credit were offered interest rates that were less than half of those with poor credit for loans over the same length of time. Taking the time to improve your credit score before you apply for car loan refinance can help ensure you will get the best rate possible.
Is it smart to refinance my car?
So is it a good idea to refinance your car? Well, it depends on your situation. But if you answer yes to any of the questions below, it might be worth considering car loan refinance.
Has my credit score improved since initial financing?
Improving your credit score is one of the top ways you can secure a lower car loan APR. And when you secure a lower APR, you can save a lot of money over the life of your loan.
Your credit score may have improved for a number of reasons:
- A negative event expired, such as a bankruptcy.
- You paid down some of your debt.
- Your credit limits increased.
- You have been making consistent on time payments.
- Hard inquiries on your report expired.
- Errors on your credit report were corrected.
Your score can increase or decrease for many reasons, so it’s a good idea to keep an eye on your score and report (we recommend checking your report three times per year). Having a good credit score will not only secure you better car loan interest rates, but it will help you qualify for other loans, get better insurance rates, and can even help you score a job. So it’s a good idea to pay a lot of attention to your credit score.
Am I having trouble making my monthly car payments?
If your monthly payments are getting away from you, refinancing your car loan may help you. Refinancing will allow you to get a new car loan interest rate, but even if you do not qualify for a lower APR, refinancing may still help you to get more manageable monthly payments.
When you refinance your car you are able to change your repayment period. The length of your repayment period will drastically change the monthly payments you will have. A shorter repayment period will mean that your payments will be high, since you have a shorter amount of time to pay back your loan. A longer repayment period means that you will have more time to repay your loan, so the principal will be divided up over a longer period of time. This means much lower monthly payments for you. But it also means that you will pay a bit more in interest. Interest rates tend to tick a little higher as the repayment period extends. You will also pay interest over a longer period of time, so it can cost you more. But this may be more than worth it to give you breathing room in your budget.
Do I want to add or remove a cosigner?
Another major reason that people refinance is to add or remove a cosigner. You cannot simply call up your current lender and request that someone be added or removed from your loan. This is because lending decisions are made based on everyone who is listed on the agreement, and removing or adding someone might drastically affect if the loan will be paid back or not. So in order to add or remove a cosigner you will need to refinance your car loan.
Are the prevailing market rates better now than they were when I originally financed?
Look at the market rates today and compare them to your initial financing. If the rates today are lower, there’s a chance you can qualify for a lower rate and save yourself a good deal of money with a car loan refinance.
And that’s what the current car loan refinance rates look like in early 2023.
A lot of people are overpaying every month on their car loans. That means that car loan refinancing can save a lot of people a lot of money. And the best news is that refinancing your car loan is super easy when you use a company that specializes in car loan refinancing, like Auto Approve.
Refinancing is our specialty, so our experts can help guide you through the process from start to finish. They can help you determine if you qualify for car loan refinance, help you fill out the applications, and assist with the final paperwork. Plus you can get other benefits such as GAP insurance and a vehicle protection plan which can be bundled into your monthly payments. And all of this can make refinancing super easy!
So don’t wait any longer to start saving money. Contact Auto Approve today to get started!