Oh, you realized you might have got a bad deal at the car dealership. Maybe it was an impulsive purchase or a very confident seller persuaded you to go beyond your budget. Or perhaps you are now struggling to pay your other bills after buying a car and don’t feel comfortable with the monthly payment amount.
If you’re experiencing mechanical problems, you may be able to take it back to a dealership, depending on your warranty (if you bought one) and your state’s lemon laws. If there are no mechanical problems with the car, under the contract, you must continue to pay for the vehicle and there is a possibility that it may not be returned to the dealership.
Whatever the situation you are in, if you are looking to get out of your car loan, there are a few options. Figuring out which one makes the most sense depends on your situation and preference whether you want to keep the car and refinance the loan, sell it or trade it in, for example.
If you think you got a bad deal at a car dealership, here’s what you need to know to put you in better financial shape.
How to determine if you got a bad deal on your car loan?
The definition of “bad” is subjective, but generally speaking, determining whether you got a bad deal on your auto loan depends on affordability and your monthly budget. These factors can make your car a source of stress for you:
- Your payments are too high and you’re stretching your budget too little.
- The interest rate is higher for your credit score limit. (if your credit has improved Since you took out the loan, you may be able to qualify for a less expensive interest rate.)
- The cost of the car was very high.
- The “extras” (i.e., vehicle warranties) you purchased were too expensive or unnecessary.
What is considered a good interest rate?
The interest rate should generally not exceed the amount you pay on the credit card. At the time of writing, the average credit card interest rate is approx. 18 percent, If it’s more than that, you should consider getting out of it quickly with a refinance.
according to this ExperianThese are the average interest rates you can expect to pay for an auto loan based on your credit score limit.
|credit score range||Average APR for a New Auto Loan||Average APR for a Used Car|
|Super Bounty (781-850)||3.65%||4.29%|
|Deep Subprime (300-500)||14.39%||20.45%|
refinance your car loan
to think refinancing If you are unhappy with the interest rate, monthly payment, the terms of your auto loan, or all of the above. if you are concerned about keeping costs downRefinancing makes more sense than moving out to get a new car. Keep in mind that there are some fees to pay when you refinance, and Upstart takes care of these charges for you. When you refinance to buy another vehicle, you’ll avoid the temptation to buy an expensive car, along with expensive sales tax.
When you refinance, you are essentially getting a new loan to pay off your existing loan with the goal of lowering the interest rate and monthly payment.
Check your credit score before deciding to go this route. If your score needs improvement, you may need to spend a few months paying your bills on time or paying off other loans before applying. Otherwise, you may not qualify for the better interest rate.
Some lenders check optional data outside of your credit score to determine whether you qualify. For example, Upstart-powered banks also look at your education* and employment, which is one reason Upstart’s underwriting model is unique from other lenders.
How to Refinance Your Auto Loan
Since you are taking out a new loan when you refinance, you can change the term or the period for how long you have to pay off the loan. If you originally took out a three-year loan but find it difficult to maintain the high payments, you can refinance for five years. Keep in mind that a longer loan term means you will pay more in interest over the life of the loan.
Before jumping into refinancing, make sure you don’t incur any fees or penalties for paying off your current loan early. Once you confirm that you won’t be charged, you can start shopping online for the best interest rates.
Remember that you can still shop for the best score within a certain time frame (usually 30 days) and the hard pull will only count as a single inquiry. This is called rate shopping.
Options to fix a bad deal at the dealership
If you don’t want to refinance, there are a few other options to consider.
Trade in your car: If you’re going this route, go for a less expensive vehicle. This downgrade will help reduce your overall auto loan.
Sell your car, private party: This may require more effort and time on your part, as there are a few more steps involved when selling your vehicle without your title (meaning, it’s still technically bank-owned. is in), which includes:
- Asking Your Lender for the Repayment Balance
- Finding Your Car Value—You Can Do It Through Kelley Blue Book or Edmunds
- Paying off the vehicle so the lender can release the title to the new owner
There is a possibility that you could even turn upside down on your loan, which means your car is worth low From the repayment amount of your loan. For example, if your car is worth $20,000, but you still have $25,000 in debt, you may have a hard time finding a personal buyer who is willing to pay you $25,000 for the vehicle.
Avoid taking a bad auto loan next time
Mistakes happen for a reason and sometimes, lessons need to be learned first to avoid doing the same in future. Here’s what to do to avoid making the same mistakes the next time you need to buy a car:
- Shop around for the best rates and compare multiple offers from lenders.
- Choose a loan term that is realistic for you, even if it is longer than you wish.
- If you can, make a down payment of at least 20 percent. This helps in reducing the overall cost of your loan.
Refinancing at a higher to lower interest rate can make a big difference in your monthly budget and help you manage your payments better.
The good thing about refinancing is that you can do it completely online and get your interest rate almost instantly.
find out how Nouveau riche Can help you out of a bad deal at the dealership and get your rate within minutes without impacting your credit score.
State restrictions: Car refinance loans are not available in IA, MD, NV, or WV. Car refinance loans in IL and MO are generated by Cross River Bank or Midwest Bank Center. All other car refinance loans are generated by Cross River Bank, an FDIC New Jersey state chartered commercial bank.
*Neither Upstart nor its bank partners have minimum educational qualification requirements to be eligible for the loan
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