Is now a good time to refinance a car loan?

Is now a good time to refinance a car loan?

Posted on October 12, 2022

The average Canadian car loan will set you back roughly $500 per month, these numbers were available before the pandemic, so it would be fair to presume that this number is now closer to $600 per month.

Interest rates are starting to track higher and will continue to do so for quite some time to come.

If your current vehicle is not going to meet your needs for the next 3 or more years, then you should consider trading that vehicle in for something newer and locking in a lower interest rate.

Car refinancing has become quite popular

Prior to the pandemic, refinancing a car loan wasn’t too common because depreciation created a situation where you were underwater on your car loan.

Underwater means you owe more on the car than what it is worth at current fair market values.

During the pandemic and even up to this very day, car values are not affected by depreciation due to unprecedented demand for new and used cars.

You can refinance a car loan and actually come out with extra cash, provided the vehicle is in a good state of repair.

We mentioned that interest rates are going up; the Bank of Canada just raised the prime rate and will be going ahead with another significant rate hike soon, so you need to start taking steps to get a competitive rate before you miss this golden opportunity.

Make sure you qualify for the best auto refinancing rates

The first thing you should do is make sure your financials are in order; when was the last time you updated your budget?

You need to make adjustments for inflation and ensure you are not carrying too much debt.

A growing number of Canadians are relying on credit to maintain their standard of living; while this works for the short term, when you are trying to refinance a car loan, if you are carrying too much consumer debt, it will make securing the new loan difficult.

Along with having a budget in place, you should consider diversifying your sources of income.

There is a risk of a recession in 2023; by diversifying your income, you are protecting yourself should your current employer downsize.

Where to find the best auto refinancing terms in Canada

You may come across websites that offer auto loans; your local bank may offer these financial services.

If you truly want the best terms, you should consider going through a local dealership.

The dealership can perform a variety of services for you; they can take your vehicle as a trade-in and get you behind the wheel of a new car at a lower interest rate than what you are paying now.

This same dealership can also help you refinance your current car and car loan; if that is the route you want to take, you should contact your local dealership now and find out which option works best for you.

When you’re ready for a car lease or loan, get in touch with the auto loan experts at Northway Ford for great deals on auto finance.