Whether you are looking to finance or refinance your car for the first time, the creditworthiness of a new vs. a used car can differ to a great extent. Here are the costs and benefits associated with both.
Refinancing a Used Car
As per popular belief, people find financing or refinancing a new car easier as compared to a used car. This is because a lender finds it easier to determine a new car’s value as compared to an old one. Also, the value of a car is an important aspect when it comes to arranging a refinance.
On the other hand, used car refinancing can also be an appealing idea as the monthly payments are usually lower. Another benefit of refinancing a used car is that it offers a lower down payment as opposed to a higher one with a new car.
Since a used car’s value is not exactly its strong point, it’s a safer deal as compared to a new car that loses a significant chunk of its value only in the first year.
Refinancing a New Car
If you can afford a high down payment on a new vehicle, might as well consider refinancing it. One of the reasons it’s a good idea to refinance a new car is that it offers a long payoff period.
Again, a longer period can either be the best or the worst thing depending on your needs. While it may be a good way to decrease your monthly payments, you will end up paying a higher amount overall. However, it is generally believed new cars have a lower interest rate as compared to used ones.
The Bottom Line
In conclusion, if you do refinance your car regardless of the new or used condition, explore the market well before settling for a deal. Moreover, make sure to have a decent credit score as it’s a huge determinant of the interest rate you’ll land.
Consider the costs and benefits associated with both and speak to people who’ve been in a similar situation. Use online resources and auto refinance calculators to figure out how much you’ll be able to save per month.