Do you own a car but wish you didn’t because of the monthly payments? You are not alone and we plan on helping you. If you are concerned about the amount you are paying or accepted a high interest rate on your car loan then you owe it to yourself to examine possibilities at least once a year.

The first thing to do is examine your sales contract. What is the amount of interest you are paying? Is there an early buy out penalty and how much is it? How much is left owing on your car? Once you have these answers you can begin the process of searching for a new loan.

The next step may not be interesting but is vital to getting the lowest rate. Start paying attention to the financial pages of the newspaper if you do not already do so. The interest rate for any loan is based upon prime interest rates. This means that if the interest rates are dropping because of a sagging economy you are likely to get a better rate and save money. Conversely if the rates are going up it may be better to wait for a while before even applying for a new loan.

Now comes the fun part, putting it all together and deciding what is best. Lets say you pay $500 a month, have another 3 years on you sales contract and there is a $2500 early buy out penalty on your loan. Now that you know what you are up against you can go quote shopping.

There are several good places to go shopping for quotes on a refinancing loan. If you have less than perfect credit then you may wish to search for quotes online, at credit unions and third party loan companies. If you do not have good credit then you may not want to bother with major banks.

Let’s say you shopped around and one company offered you a loan at a lower rate so the payment is only $425 a month. This is great but is it a good choice? Let’s do the math.

You are saving $75 for 36 months for total savings of $2700 over your current loan. This is great progress but now we need to look at the cost. The buy out of the loan is $2500 meaning you are only saving $200 and there may be transfer fees that could quickly eat up this surplus that you may not have on hand.

Here is the debate. To save $75 a month is it worth it to pay $2500 out of pocket plus any fees? Only you can answer that after examining your current situation. Perhaps you have some money saved so you could afford the buy out penalty. In this case, even though it really is costing you money, it may be easier to afford your car at the lower rate.

To get the most from your loan or refinancing your auto loan remember the following things.

1. Consider a car 2-3 years old instead of brand new for purchasing. The amount of money you will save because of your higher interest and the slightly depreciated value can be impressive.
2. If you are refinancing your current auto loan you should do so when the car is as new as possible and with less than 60,000 miles. Anything over 60K or more than 3 years old may be considered used and will increase the interest rate.
3. Contact the dealership that originally set up your loan. If you have been making regular payments on time for at least 6 months they may be able to get you a better interest rate. The single best thing you can do for your credit is to make regular payments on a car loan.
4. Use a trade in vehicle and put down the largest amount of money possible. If you are paying a higher interest rate the smaller the amount of the loan the less interest you will be repaying and the lower the monthly payments. A $15,000 loan at 9% for 60 months works out to $311.38 a month and $3555.74 in interest. If you put $3000 down a $12,000 loan at 9% for 60 months works out to $249.10 a month and $2,844.57 in interest, a huge savings.
5. Repay the loan bimonthly. By paying the loan bimonthly you will greatly reduce the mount of interest being paid and make lower monthly payments.