Should I Refinance my vehicle? The right answer is… MAYBE?

Consider the litigation behind this:

1) If a dealership does this for you they are required to have an inspection done on the car by provincial law.  Guess who pays for that? YOU!

2) If you purchase a vehicle from a dealership, unless your tax exempt… you are supposed to pay taxes on purchases, aren’t you?  Guess who pays for that? YOU AGAIN!!

How much did you save on interest by refinancing?

Example) If you went from 7% to a 5% fixed interest rate and you owed $25,000 on a 5-year term.

7% would be $4,702

5% would be $3,307

That equates to a savings of $1,395 – WOO HOOO!!

Oops, I forgot the GST we have to pay over again on $25,000… that’s $1,250 + the inspection is a minimum $225 inspection cost.  Oh, don’t forget the bank fees to put a lien on the vehicle, that will be about $60.

$1,395 in savings

$1,535 in costs

= $140 it cost you to get a “better interest rate”

Truthfully, you are better off to dump as much principle only payments as you can on the loan to pay it off faster and save the future interest costs.

Wait a minute… you said the answer was MAYBE you said!

What is the upside? How can I do this with no extra costs?

Visiting your branch is the answer, but a lot of times they can’t assist on the vehicle itself, it ends up becoming collateral on a large consolidation loan which actually makes you hugely upside down as all the debt consolidated is sitting on the hood of the car which you cant trade unless its all paid off and your branch is now in control collecting your money. You payment per month on everything may have improved, the rate may have improved… but your ability to get out of the car one day has not… but MAYBE that’s a better situation for you.

For most, it isn’t.  Send and application to trade the car in and ask for cashback – that’s your better route.

Banks are a business, do not ever forget that.

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