Ask Andy: Auto refinancing

By Andy Wise - bio | email

MEMPHIS (WMC TV) - Refinancing your car loan could really lower your monthly payment, especially if you're paying six percent interest or more on your current auto loan.'s Tara Baukus Mello said auto refinance rates are one to two percent lower than last year, depending on the length of the re-fi loan.

But there are rules.

If you're behind on your current loan, most lenders won't re-finance you, although there may be an exception (see the State Farm information below).

Mello said if you are current on your payments, you might consider car refinancing if:

* Your vehicle is LESS THAN FIVE YEARS OLD...and it's worth at least what you owe.

* You owe MORE THAN $7,500.

Unlike a home re-fi where you might extend the loan on that appreciating asset that is earning equity, you should only refinance a car loan for the same number of months remaining on your current loan. Obviously, you don't want to stretch out a loan on a depreciating car.

A word of warning:  bailing out of your current loan may cost you a PRE-PAYMENT PENALTY. You will also likely pay a small fee to transfer the title to the new loan. Check with your lender.

Valerie Meitzler, life & health specialist for State Farm Bank Services (, said State Farm's auto refinancing charges no application fees or closing fees. She said it also offers free "gap coverage" to clients who are upside down on their current loans (for my story on gap coverage and gap insurance, please click on this Ask Andy story:

"We just refinanced a client's car last week that cut the finance charges by over $12,000 by getting him a rate 1.5% lower than what he was currently paying," said Meitzler in an e-mail to Ask Andy. has broken down the five best situations for refinancing an auto loan:

For's guidance on whether you qualify for an auto re-fi, click here:

For's auto refinancing calculator, click here:

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