What are the pros and cons or refinancing an auto loan?

Question

and how do you do that?

Answer 1

You go to a lender and ask to refinance your car. A lender can be a bank, credit union, etc. I refinanced my car thru Chase Auto; applied online.

It is just like borrowing any type of money. You look at how much your car is worth on the market, and how much you still owe the bank. In my example, after making payments (it was a lease) for 3 years, I could buy the car for $11,000 on a 2004 Honda Accord. It was worth $11,500 at the time. A new car would cost $21,000, which meant higher monthly payments. (Payments on $11,000 versus payments on $21,000)

So, I refinanced at 6%. The down side to that is I will be paying for a car for 3 more years. In essence a 6 year loan. So, I will have paid more interest to the bank, but my payments have remained low. Also, at the time I pay off the car it will be 6 years old. I figure to get 4 more years out of it before I have to bite the bullet and buy a new car.

Pros: Lower monthly payments, if the interest rate is good.

Cons: Overall, pay more for the car.