How joint car finance works through Autedia
What does it mean to Refinance a Car?
Can I refinance my car or refinance a balloon payment, and what does that mean?
Refinancing a car means paying the outstanding amount on an existing car finance loan with a new one, typically from a different provider. Many people refinance a balloon payment on a PCP this way.
As we all know, life is constantly changing. Committing to a three- to five-year car finance may be expensive, as you might end up locked into a less favourable interest rate.
Suppose you’re stuck with existing car finance and unhappy with it. You might want to refinance your car loan.
Typically you’ll ask your current finance company for a car settlement figure and your new lender pays off the old loan.
If you’re tight on cash, you may wish to refinance and spread the cost longer than what’s left on your original car finance, meaning you could make lower monthly repayments. (but more overall with interest).
We work with an expert panel of lenders who can find you a car refinance deal with a better APR than your current car finance.
Why should you choose Autedia for your car finance?
Why might you Refinance a Car?
Here are some of the main reasons you might want to consider refinancing a car loan:
Refinance Balloon Payment on Car
One of the most popular types of car finance, a PCP deal, offers you a chance to own the vehicle by paying a hefty fee (a balloon payment) at the end of a PCP. You must return the car to the dealer if you don’t want to pay. Can I refinance a balloon payment? Yes, you can.
Suppose you opt for a car refinance deal at the end of a PCP; you can split the balloon payment into monthly instalments. Naturally, this will extend the overall financing period, meaning a higher cost in the long term due to accruing interest.
Get a Lower Interest Rate
Suppose you financed a car a couple of years ago and have made all your repayments on time. You may find that your credit score has improved significantly! You could be eligible for a lower interest rate. If you refinance your car with a better interest rate, you might pay less over the term of your new agreement.
Reduce Your Monthly Repayments
With the increasing cost of living, you may find that your monthly car loan payment is consuming too much of your paycheck. You might consider taking out a car refinance loan if that’s the case.
Refinancing your car allows you to opt for a new car finance agreement with lower monthly payments. Extended the period: will enable you to pay significantly less per month. The downside is that the additional interest added over that time will probably be you’re paying more overall.
Car Finance Calculator
|Total cost of credit
Rates from 8.9% APR: the exact rate you will be offered will be based on your circumstances, subject to status.
Representative example: borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £143.76 per month, with a total cost of credit of £2125.46 and a total amount payable of £8625.46.
Should I Refinance my Car?
If your circumstances are much the same as when you started your car finance, a refinancing deal might not be worthwhile. But if things have changed, it can be an excellent way to optimise your finances.
As costs increase (and salaries freeze), you may need to reduce your monthly outgoings. By refinancing your car, you can take out a new deal with a longer-term – meaning lower monthly repayments and more disposable monthly income.
Remember that this might not be the best overall financial strategy, as you might pay more interest. However, it’s a good option if you need to reduce your monthly outgoings.
Even if you’re not struggling monthly, you might want to consider refinancing. Interest rates constantly fluctuate, and the deal you locked into might be worse than what’s available now.
If your credit rating has improved since you first took out the deal, you might be able to find a new loan with a lower interest rate – you’d be paying less overall.
If you’re at the end of a PCP agreement, you might want to pay the balloon payment to keep the car. However, this is usually a few thousand pounds and may be challenging to pay off in one go. If you take out a refinancing loan, you can split the cost over a new agreement term for affordable monthly repayments. However, due to an extended financial period, this may result in paying more overall.
Can you Refinance a PCP Balloon Payment?
One of the main benefits of a PCP deal is that you have a few options. The most common one is to return the car to the dealer and take out a new PCP deal on a newer car. You can also choose to hand the car back and walk away.
Another option at the end of a PCP is to pay a balloon lump sum to pay off the car and become the owner. This sum usually comprises the car’s current value, usually a few thousand pounds.
You can refinance a balloon payment and avoid worrying about coughing up a few thousand upfront for the balloon payment.
Of course, you will end up paying interest, whereas you wouldn’t if you paid the balloon payment without financing.
When can I Refinance my Car Loan?
How long after getting a car loan can you refinance? You might think you must wait until the end of your contract term to refinance. However, that’s not true! You can take out a new policy and settle what you owe for the current arrangement.
You can find a deal with lower monthly repayments (as it’s over a longer term than what’s left on your initial car finance deal).
If you want to pay as little as possible on interest, you could find a new finance agreement with a lower APR, meaning you spend less overall on your car.
Many finance providers offer car refinance. It’s a super simple process. After you’re approved, your new lender will pay off the existing car finance. And you’ll begin paying the lower monthly payments to the latest finance agreement.
Refinancing a Car that’s Under Five Years Old
If your car is under five years old, you might refinance onto a PCP agreement, subject to the type of car.
The advantage of a PCP deal is that your monthly payments will be much lower than with a Hire Purchase or bank loan.
You also have the advantage of three different options at the end. You can:
- Return the car to the lender, and walk away.
- Return the vehicle to the lender, and opt for a new PCP car finance deal.
- You could pay the balloon payment and own the vehicle outright.
Refinancing a Car that’s More than Five Years Old
If you have an older car, you’ll need to consider a Hire Purchase or bank loan to refinance. Because setting a PCP balloon payment is tricky to calculate on older cars!
Instead of a PCP, you might want to consider a Hire Purchase car finance deal. A Hire Purchase has fewer options than a PCP but is significantly more straightforward.
Essentially, you ‘hire’ the car until your final repayment. After that, you own it outright. Your monthly payments will be higher than with PCP because you pay off the car’s total value.
Even if you refinance to a Hire Purchase deal from a PCP, you’ll likely be paying a lower monthly repayment. That’s because of the depreciation of the car.
Can you Refinance a Car with Bad Credit?
You can refinance on a car with bad credit; working with a large panel of lenders means we can find the right car refinancing deal for you, no matter your circumstances.
Not confident in your credit score? Don’t worry – we work with many lenders specialising in offering credit to those with a low credit rating.
Can you Refinance a car that has Negative Equity?
What does negative equity car finance mean?
Suppose your car has depreciated quicker than expected. In that case, you may even owe more money than the car is worth, known as negative equity. If you find yourself in this position, we can look for a lender to offer you negative equity car finance, the total amount you owe, not just what the car is worth.
Can I Refinance my Car Here?
You’re in luck if you’re interested in refinancing a car to reduce your monthly repayments, pay less interest, or pay off a balloon payment.
Take out a quote, and if you get approval in principle, we’ll have an account manager call you to advise on your options and answer any questions. There’s no risk involved – there is no commitment yet!