Years ago, you thought that a one-stop-shop for your new truck would be the best option for you. You could pick out your truck, go for a test drive, arrange your financing, and drive off in your new car in just a few hours.
Unfortunately, if this sounds familiar, there’s a good chance you are overpaying for your truck loan.
Let's take a look at the who, what, why, and how.
First off, let’s talk about the differences between getting a vehicle loan from a bank or lender and getting one from a dealership. There are pros and cons to both, but in general it is better to get your loan from a lender.
Dealer financing is simply when the truck dealership sends out your information to different lenders and banks. They receive the offers and present them to you, but with an added percentage (their markup).
With direct financing you get approved for your financing before you shop at the dealership. You have to do more of the legwork, but you avoid the dealer markups.
There are two main advantages of financing through a dealership: convenience and incentives.
The main advantage of dealer financing is convenience. You simply fill out some paperwork, and they will handle getting all of the quotes for you. They already have relationships with banks and lenders, so this typically happens pretty quickly, and you can drive off in your new car in just a few hours.
Another advantage of dealer financing is the offers and incentives they may give. They can offer promotional rates and discount their inventory at certain times.
The major, and most important, disadvantage of dealer financing is that it will most likely cost you more in the long run. Since they are acting as the inbetween for you and the lender, they are simply marking up the rates.
Additionally, the “deals” that dealerships run are oftentimes not worth the money you will save by going through a traditional lender. A little savings up front rarely outweigh an increased APR of 1-2%.
A big draw of dealership financing is the “no credit, no problem” advertising. They tell you that even if you have very poor credit, they can still approve you for financing that is beyond your means. But these deals are dangerous, as they are high risk loans and will carry a much higher APR than traditional loans.
Sometimes dealers will offer 0% financing. But how do they make money off of this? Well, they use this as a way to get people in the door. They can either raise the sale price of the car beforehand, or use it as a chance to get rid of older models that aren’t selling as well. Either way they are making money, just not through the financing.
Dealers essentially “buy” the financing for a vehicle at one rate, add on to it, and then “sell” it to the consumer for the marked-up rate. Each sale is different, but typically dealerships can make thousands of dollars from the marked up rates of financing. The dealerships do have some wiggle room with this – after all, they can choose how much they want to make each sale. This means that dealers can reduce the APR at certain times to encourage sales and meet monthly sales goals (it’s true that buying a car at the end of the month can get you some better deals).
If you got your truck loan from a dealership, you should definitely think about refinancing as soon as possible. After all, the sooner you refinance your car or truck, the sooner you will start to save money.
Again, if you financed through a dealership originally, refinancing is most likely a good option for you right now. But here are some other factors that may help you decide that refinancing is the right move for you.
If your credit score has improved, you will most likely be approved for a lower APR. Lenders reserve their best rates for customers with the highest credit scores. Your credit score is affected by a combination of payment history, amounts owed, credit history length, credit mix, and new credit. It is very possible that one of these areas has changed since your initial financing. Check your credit report to make sure everything is accurate and up to date. This will put you in the best position to get a good deal when refinancing an auto loan.
If the market rates have decreased since you originally financed your truck, there’s a good chance you can get a lower interest rate if you refinance. Market rates are set to increase later this year, so the time is now to commit to refinancing.
If you are having trouble with your monthly payments, refinancing your car loan or truck loan may help a great deal. Refinancing can help you with monthly payments in a few ways. First of all, it can help you secure a lower interest rate which will automatically reduce your monthly payments. This will also ensure that you will save on the total amount that you pay back. Second, it will allow you to adjust your repayment plan. Lengthening your repayment plan will allow you to pay off your loan over a longer period of time, making your payments every month significantly lower.
Before you get too deep into refinancing, you want to make sure that your current loan doesn’t have any deal-breaking prepayment penalties. If your loan does have some significant penalties for paying off the loan early, then you should do the math to determine if it is still worthwhile to refinance.
If you are looking to either add or remove a cosigner, you will need to refinance your car or truck loan. There are a number of reasons why adding or removing a cosigner might be a good move for you – read our blog post all about cosigners here.
You can refinance your car loan with most lenders that do auto refinancing – including the dealership. But you will likely not help yourself by refinancing through a dealership.
You can refinance a truck loan with most lenders, including credit unions, traditional banks, and online lenders. You want to do your research and be sure to consider the following:
The interest rate. Where can you get the most competitive interest rate?
The prepayment penalties. Are there prepayment penalties?
Your cash flow. Do you need a longer repayment plan so that your monthly payments are on the lower end? Or would you prefer a shorter repayment plan so that you can pay off the loan faster and save money overall?
Customer satisfaction. Are their customers happy, or are they frustrated? Use websites like TrustPilot and the Better Business Bureau to check out each lender.
Hidden fees. Look over the terms to see what additional fees you are being charged.
But did you know you can save yourself a lot of time and energy by using a company that specializes in auto refinance?
Auto Approve is the fastest and most effective way to refinance your car or truck loan. We have established relationships with lenders from all across the country, and we use those relationships to get you the best deals possible. We handle all of the paperwork for you so you don’t have to worry about it. Just head over to our online quote form, fill out some information, and we can have offers for you within minutes.
The best part? We never mark-up our rates – EVER! The rates we get from the lenders are the rates we pass on to you.
Once you pick a deal that works for you, we even handle the DMV paperwork! (It seriously couldn’t be any easier)
But don’t just take our word for it. We have a 96% would-recommend rating on Lending Tree and an A+ rating from the Better Business Bureau. And if that’s not enough, you can head over to our TrustPilot page to see exactly what our customers think.
So what are you waiting for? Start saving money with Auto Approve today!!