Can You Refinance an Older Car?

If you’re wondering whether you can refinance an older car, you’re in the right place. Refinancing your car loan is a great way to reduce your monthly payments, lower your interest rate, and potentially save thousands of dollars in interest over the life of your loan. However, refinancing an older car is not as simple as refinancing a younger vehicle. Banks and financial institutions often have specific requirements for older vehicles, and not all makes and models are even eligible for refinancing. Maybe you have a classic car, and you want to refinance it, or you want to see if you can get a better rate on your old beater. Either way, it’s important to know what your options are.

In this article, we’ll explore the ins and outs of refinancing an older car, including the pros and cons, eligibility requirements, and where to begin.

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Can You Refinance an Older Car?

The short answer is yes, you can refinance an older car. Many lenders offer refinancing options with specific requirements for older cars, and your eligibility is subject to the discretion of the lender. Remember, a lender takes a risk when they loan money, and an older asset, such as a car, can be riskier. Cars are usually depreciating assets, meaning their overall value drops over time, so not all vehicles will qualify for refinancing. But don’t worry, that doesn’t mean you’re completely out of options.

What Does It Mean to Refinance a Car?

Refinancing a car means replacing your current car loan with a new one that ideally has better terms than your existing deal. The new loan will pay off your old loan, and you’ll start making payments on the new one. Refinancing your car can help you save money on interest, lower your monthly payments, or change the length of your loan term. Refinancing is a great option because it gives you more breathing room on your loan if you qualify for a lower monthly payment.

Why Would You Refinance an Older Car?

There are plenty of reasons why you might want to refinance your older car. For example, if you’re struggling to make your monthly payments, refinancing can help you get a lower interest rate, lower monthly payments, or extend the term of your loan. Refinancing can be a good option if your credit score has improved since you first purchased your car, or if you want to get out of a high-interest loan or a loan with unfavorable terms. Financial institutions offer better rates to borrowers with healthy credit scores and a good payment history, and a shorter loan term could also help you land a better rate. Ensure you shop around with multiple lenders so you can choose the loan with the most favorable terms.

What Disqualifies an Older Car from Refinancing?

Even if you’ve got good credit, there are still some factors a lender considers before refinancing an older car. The following factors might disqualify your car entirely:

• Negative equity: If you owe more on your car than it’s worth, it can be difficult to find a lender willing to refinance your car.
• High mileage:Cars with high mileage are more high-risk for lenders and can be difficult to refinance. The higher the mileage, the more likely the car is to have mechanical issues or need repairs, which can make it less valuable and less attractive to lenders. Many lenders set the mileage limit to between 100,000 and 150,000 miles.
• Age of the car: Older cars can be challenging to refinance, as lenders consider them high-risk. The older the car, the more likely it is to have issues with reliability, safety, and resale value. A car over 10 years old, for example, typically isn’t eligible for refinancing.
• Salvage title: If your car has a salvage title, it may be challenging to find a lender willing to refinance it. Salvage titles indicate that an insurance company has declared the car a total loss, which can make it difficult to determine its value and make it less attractive to lenders.
• Modifications: If you’ve heavily modified your car, lenders might not consider refinancing it. Modifications can alter the car’s value and make it less attractive to lenders, as it’s harder to determine its true market value.

Can You Refinance Classic Cars?

Yes, you can refinance classic cars, but it can be more challenging than refinancing newer vehicles. Many lenders consider classic cars to be high-risk because of their age and potential for depreciation. Additionally, the value of classic cars can be difficult to determine, making it hard to get a loan with favorable terms. However, if you have good credit and the car is in reasonable condition, you may be able to find a lender willing to refinance your classic car, with some specific terms.

Can You Refinance Cars with over 100,000 Miles?

You can refinance cars with over 100,000 miles, but it may be more difficult to find a lender willing to do so. High mileage is usually an indicator of risk for a lender, and a new loan might not account for unforeseen mechanical issues. After 100,000 miles, vehicles usually start losing more value, so there’s only a slim chance that a lender might refinance it. However, if your vehicle is in good operating condition and you have complete, accurate records of its maintenance, you might be able to get a new loan for it.

Refinance Scams

Scammers often target people with older vehicles, because it’s more difficult to get the financing they need. Scammers might tell you that they have a great interest rate offer or can refinance your car when no one else can. Be wary of potential scams and look for the warning signs. The Federal Trade Commission has an article on vehicle scams here.

How to Get an Older Car Loan

Follow these steps to apply for a refinancing loan for an older vehicle:

Check your credit score

Before applying for refinancing, check your credit score, as this plays a crucial role in determining your eligibility and the interest rate you receive. You can check your credit score through free online credit monitoring services or sometimes through an existing bank or creditor. You can also obtain it through the credit bureaus, Equifax, Experian, or TransUnion, which may involve a fee. If your credit score is low, consider taking steps to improve it before applying for refinancing. A low credit score means you won’t get the most favorable rates and terms, which can ultimately put you back where you started.

Research lenders that offer refinancing for older vehicles

Not all lenders offer refinancing for older vehicles, so it’s essential to research your options and find lenders that specialize in these types of loans. You can research lenders online, visit your local credit union or bank, or ask for recommendations from friends and family members. Make a list of potential lenders and compare their interest rates, fees, and loan terms. The idea is to get the most favorable rates, so consider applying for pre-approval from the best available options. Remember that lenders usually run a credit check, and too many hard inquiries can actually lower your score.

Determine the value of your car

Knowing the value of your car is essential when applying for refinancing. Use online valuation tools to get an estimate of your car’s value. This information will help you determine how much you can borrow and what interest rate you might expect. The value of your car depends on a few things, including:

• Age: The age of the car is a crucial factor that affects its value. Generally, the older the car, the less valuable it is, unless it’s a classic or vintage car that has appreciated in value.
• Mileage: The mileage on the car is another important factor that affects its value—the higher the mileage, the lower the value of the car.
• Condition: The condition of the car is perhaps the most important factor that affects its value. A well-maintained car that you’ve kept in good condition will be worth more than a car that you’ve neglected or poorly maintained.
• Make and model: Some brands and models are more popular and sought-after than others, which can increase their value.
• Features and options: Cars with more options and features will generally be worth more than those with fewer options.
• Rarity: If the car is a limited edition or rare model, it may be worth more than a more common model.
• Market demand: If there’s current high demand for a particular make and model, the value will be higher than if there’s low demand.
• Location: Cars exposed to harsh climates or environmental conditions may be worth less than those that have experienced a milder climate.
• Maintenance history: If you’ve regularly serviced your car, it will be worth more than if you neglect to maintain it.
• Accidents and damage: A car with a history of accidents or significant damage will generally be worth less than an accident-free vehicle that you’ve maintained well.

Gather your documents and submit your application

To apply for refinancing, you’ll need to provide documentation, including proof of income, proof of insurance, and proof of ownership. To streamline the process, gather these documents together before you begin your application. Your proof of income can include pay stubs, W-2 forms, bank statements, or tax returns. Proof of insurance should demonstrate that you have comprehensive and collision coverage on your vehicle, and proof of ownership should show that you own the car and have a clear title. You’ll also need to provide information about your car, including its odometer reading, vehicle identification number (VIN), and description, as well as details about your existing lender.

Once you’ve gathered your documents, it’s time to submit your application to the lender you’ve chosen. Make sure to provide all the required documentation and answer any questions the lender may have about your application. The lender will review your application and determine whether you qualify for refinancing.

Review and accept the loan offer

After submitting your application, you’ll need to wait for a response from the lender, which can take anywhere from a day to a few weeks, depending on the lender and the complexity of your application. During this time, the lender will review your application, run a credit check, and verify your income and other information. If the lender approves your application, they’ll send you a loan offer. Review the offer carefully, paying attention to the interest rate, repayment terms, and any fees associated with the loan. If you have any questions or concerns about the offer, contact the lender.

If you’re happy with the loan offer, accept it. You’ll need to sign the loan agreement and provide any additional documentation that the lender requests. Once you’ve accepted the loan offer, the lender will disburse the funds to your existing lender, paying off your old loan, and your payments will start on the date you’ve agreed in your loan documentation.

Private Lenders

If you’re having trouble getting financing, you might consider a private lender. Private lenders are typically individuals or companies rather than traditional banks or credit unions. They might be family, friends, or private financial institutions. They can offer refinancing options for those who may not qualify for loans from traditional financial institutions.

Pros of Private Lenders

• Potentially easier to qualify: Private lenders may have more flexible lending requirements, making it easier for those with poor credit or unique financial situations to get approval.
• Faster approval process: Private lenders can often process loan applications faster than traditional banks or credit unions.
• More personalized service: Private lenders may offer more personalized service and be more willing to work with borrowers to find a loan that meets their needs.

Cons of Private Lenders

• Higher interest rates and fees: Private lenders may charge higher interest rates and fees than traditional financial institutions.
• Less regulated: Private lenders are less regulated than traditional banks and credit unions, which can make them riskier for borrowers.
• Higher risk:Private lenders may be more likely to lend to high-risk borrowers, which can mean higher default rates and higher risks for investors. Just like with a regular loan, the lender can repossess your vehicle if you default.

Carefully consider the pros and cons of choosing a private lender. It’s important to research multiple lenders, compare interest rates and fees, and read reviews from previous borrowers to find a reputable lender, just as you would with a bank or credit union.

The Bottom Line

It’s possible to refinance an older car, but you might want to consider other options first. Lenders will give loans for older vehicles, but they’re usually subject to more extensive requirements, and an older car is ultimately a depreciating asset. Consider your options carefully and do your research on lenders, interest rates, and your vehicle. Even a well-maintained vehicle might not qualify for refinancing if it’s too old or has too high mileage.

Hearst Autos Research, produced independently of the Car and Driver editorial staff, provides articles about cars and the automotive industry to help readers make informed purchasing choices.