Times are still tough for many Americans. Most of us save wherever we can in order to make ends meet or even save a buck or two. Yet many people overlook money they could save from reworking their car loans. Millions of homeowners have garnered huge savings in recent years from one simple move: refinancing their mortgages. So why not renegotiate your car loan, too?
Since a growing number of people choose to buy new vehicles even before the loans are paid off on their old ones, it's often easier just to take advantage of financing deals from new-car dealers. Moreover, cars typically lose their value so quickly that the loans turn upside down — meaning that the outstanding loan is more than the car is worth — making refinancing a tough proposition.
Even so, auto refinancing can save some consumers hundreds, even thousands, of dollars on average over the life of a car loan. Unlike home mortgages, it often doesn’t cost anything to refinance an automobile. And auto loan terms have also grown, now averaging longer than five years on a new car or truck, giving owners more time to consider it.
According to CNW Research, auto loan refinancing could top 14.1 percent of existing contracts in 2014, a 12 percent increase since 2012 and more than double the rate in 2009. The primary reason: Consumers who purchased a new-vehicle during the recent recession tended to pay exorbitant fees and interest rates so they would qualify for much-needed loans. Now, that their credit scores are better or financial circumstances changed, these same individuals want to lower their interest rates accordingly.
Data analysis from CarFinance.com supports this conclusion: it indicates that recession-year models (2007/2008) are among the most refinanced cars by below-prime consumers.The data also reveals that below-prime car owners (those hardest hit by the recession) who focused on lowering their interest rates and/or monthly payments through refinancing, tend to own sensible and durable vehicles — That is, mid-size sedans with a reputation for longevity and value.
Here are the most refinanced rides on CarFinance.com from that era, why consumers might want to keep them, and how much they saved on average by refinancing. Remember, based on your credit and loan, your mileage may vary:
The 2008 Altima was widely considered to be the sportiest vehicle in the mid-sized class with distinctive styling and a very attractive price tag. It also had one of highest fuel ratings for non-hybrid vehicles in the segment (23 mpg city/31 highway). And while it outperformed many of its rivals like the Honda Accord and Toyota Camry on the track, it fell short in creature comforts.
Average savings per month: $73
Average interest rate reduction: 5.01%
The Ram 1500 has always been a big-truck with big power. In 2008, the 1500 got even more powerful, thanks to a new 4.7-liter V8, and even more spacious in the cabin. However, the beast wasn’t very maneuverable, and the 4.7-liter guzzled the go juice like a parched sailor on a 48-hour pass.
Average savings per month: $120
Average interest rate reduction: 4.98%
3. Honda Accord
The Accord received a complete redesign in 2008. The new car drove better, looked better and was more efficient than its predecessor. Unfortunately, the model year lacked some of the luxury amenities found in its competitors. Even so, it was one of the strongest values in mid-sized class.
Average savings per month: $90
Average interest rate reduction: 5.74%
4. Toyota Camry
The 2008 Camry offered everything a family could want: it was a competent performer, had a spacious interior and got good gas mileage. Plus, it had an iron-clad reputation for practicality, reliability and value. While the overall package was undeniably impressive, the vehicle was – and continues to be -- rather ho-hum.
Average savings per month: $102
Average interest rate reduction: 5.36%
The Charger is a powerful beast, with a stylishly, aggressive look and roomy, comfortable interior. It is also offered at a comparatively budget-price. Unfortunately, Dodge skimped on the interior.
Average savings per month: $79
Average interest rate reduction: 5.84%