Auto Refinance Tip
Read the auto refinance company guidelines for vehicle age and mileage before you apply. As a rule of thumb : vehicles with less than 75,000 miles and under 8 years old will qualify.

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Can I auto refinance an older car?

Age limits for refinance are usually 7 years and less

As you might already know, refinancing your existing auto loan is a great way to put money back into your pocket. With interest rates at historic lows, we think that it makes sense to explore the option of lowering your rate.

There are many components that need to be considered before you can successfully do an auto refinance. This article is going to discuss the topic of vehicle age and type.

Vehicle Age
Why does the age of your car matter in the refinance equation? Answer: unlike your home, which normally holds its value or appreciates, your car is a depreciating asset. As such, your car will lose its value through time. If you have an old car, then the bank essentially has a piece of collateral that isn't worth very much against the loan amount. Another way to explain this is that the the loan to value ratio is too high.

Ex: You own a 1995 Dodge Intrepid that you bought last year at a used car dealership for $7000. You decided to finance all of the purchase last year. Now, you decide to refinance your existing loan to take advantage of lower rates. The amount left on your loan is $6500. Likely you can't get a refinance because the Kelly Blue Book value of the car is only $1500. Therefore, the loan ($6500) to value ($1500) ratio is too high for a bank to consider doing an auto refinance, irrespective of your credit profile. In concrete terms, the value of the collateral cannot support the refinance option. It will be too risky for the bank to lend money to a consumer whose collateral is worth very little (in this example).

Thusly, most banks will impose a vehicle age limit on auto refinance applications. In our experience, we see that vehicle model years that are older than 8 years will not be considered for a refinance car loan.

Vehicle Type
Do you own a classic car or vintage make? These types of cars, along with commercial vehicles and kit cars, will not be considered for refinancing. Classic cars do not have much resale value at auction, which drives how the bank will appraise the car's value in the LTV equation. Because the auction market is not liquid for classic cars, they tend to be sold for very, very little money. Because banks are keenly aware of this, they will not consider lending money to consumers who are looking to refinance a loan for a classic or vintage car.

Unfortunately you cannot refinance a really old car because it's value has depreciated too much. So we recommend that you not apply for a loan if this situation applies to you. Because a vintage car value is quite subjective, banks will tend to avoid making a car refinance in these instances. If you own a car whose model year is less than 8 years old, then you will likely qualify for a loan, as it relates to vehicle age.


Car Refinance