5 Benefits of Vehicle Refinance You Should Know

Nov 16, 2022 | Car, Finance & Refinancing

Vehicle refinance, put it in simple terms, is the process of replacing your existing vehicle finance loan with a new one – either through the same or another financial institution. The new loan pays the balance owed on your previous loan and gives you new repayment terms that you would meet as part of the new loan agreement.

If you want to familiarise yourself with how refinancing your vehicle works, we’ve created this guide on ‘How To – Vehicle Refinance.’

There are several benefits and motivations behind deciding to refinance your vehicle. In order to make the right decision for your situation, it’s best to be properly informed on the topic.

 5 insights into why you might choose vehicle refinance.

  1. Interest rates have dropped
    We’ll start with the strongest reason why you might consider vehicle refinance, which is to save money on the interest you’re paying on your existing loan. If interest rates have dropped, then refinancing your loan means that you can get lower rates and save more money every month.
  2. You want to get out of debt faster
    We all want to get out of debt faster! Refinancing your vehicle means that you could secure a shorter repayment period, although we would caution you to check that there aren’t any early repayment penalties.
  3. More manageable monthly installments
    If you’re struggling to keep up with your car payments, vehicle refinance could result in lower repayment amounts – which is a good sight better than defaulting on your payments.
  4. The power of negotiation
    We’ve mentioned that you can take advantage of lower interest rates and shorten your repayment period, but the true benefit is simply knowing that you have the option to negotiate a shorter or longer loan period based on your affordability. This can be useful if your personal situation changes and you want to pay off your vehicle faster, or if you need to take it a bit slower.
  5. Sort out the imbalance
    Vehicle refinancing is an extremely useful way to address a situation where your current loan is greater than your car’s actual value. The key to figuring this out, though, is to first get a reliable vehicle valuation report.

Vehicle valuation report

Speaking of vehicle valuation reports, this is something that you can get for free today! AA Inform has partnered with Lightstone to provide free valuation reports that contain the retail estimate value, trade estimate value, introduction date, the last five retail sales, and much more.

Try it out for yourself! Vehicle Valuation Report

Words for the wise – vehicle refinance could cost you

There are a number of appealing reasons to refinance your vehicle, however it’s best to know that there could also be a cost associated with this decision.

You see, if you pay off your current vehicle loan early, some banks and financial institutions may charge a pre-payment penalty. Some banks and car dealerships may require you to pay the entirety of the interest owed for the negotiated repayment period.

There may even be additional costs attached to taking out a new loan, like administration charges and vehicle inspection fees. Additionally, there could be negative effects on your credit score as a result of applying for finance again.

These costs are well worth weighing up before you do anything.

Feeling informed?

We hope that this information will prove useful! Don’t forget that AA Inform is home to a range of tools and information, including trip fuel calculators, property valuation reports, and advice on whether you should get a warranty, maintenance, or service plan.

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