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Should I Refi or Buy a New Ride?

Imagine you’ve had your current vehicle for a couple of years. You had your ups and down together — replacement wipers, dodgy brakes, maybe a battery fried by the Arizona heat. She’s slightly worn, but still looks almost new.

You open your mailbox (real or virtual) and find a sales flyer advertising what looks like an amazing deal on a new vehicle from a reliable manufacturer. One glance back at your ride and you start wondering: Should I trade her in for a new model? Or should I consider keeping her and refinancing my current car loan?

We’re breaking down the benefits of both options so you can figure out what works best for you:

The Perks of Refinancing

Many financial institutions offer refinancing deals with a variety of loan terms for customers or members. The best part is that you won’t have to rely on dealership finance departments or jump through sales hoops this time around.

Refinancing a car is fairly quick and painless for the consumer, especially if you consult a bank or credit union you already have built a relationship with. Before you do so, you’ll want to have your loan payoff amount in hand, as well as your vehicle’s estimated Kelley Blue Book value.

Here are three top reasons to consider an auto refi:

  1. Lower Interest Rates: If your credit score has improved since you first purchased your vehicle, you may be eligible for lower interest rates. Even if your credit score has remained stable, interest rates may have dropped.

    There’s no need to stick with your current lender unless you’re getting the absolute best deal. Shop around for refinance options, and try contacting both your current lender and primary financial institution to see if a better option is available.
  2. Lower Payments/Faster Repayment: The most common loan terms for a new or used vehicle purchase are 60 or 72 months. Purchase a new vehicle and the clock typically resets again, meaning you’ll likely have five-to-six years of payments ahead of you again. If you opt for shorter terms such as 36 months, your payments may be significantly higher than you’re used to.

    On the other hand, if you refinance your existing car, truck or SUV, you could opt for a shorter loan term without feeling a pinch in your wallet. Depending on interest rates and loan terms, you could even potentially lower your payment!
  3. Cash Back and Other Offers: You’re probably not getting anything special from your existing loan. Refinance your auto loan, though, and you may be able to snag a special deal that will put more money in your pocket. For example, Desert Financial’s Auto Three-fi™ has triple the perks: low rates, up to $500 cash back1 and a 90-day break from payments.2

The Benefits of Buying

Upgrading or trading in your ride for a new one might seem like the best decision, especially if the offer includes a low interest rate and/or special pricing. It’s less likely that you’ll lower your monthly payment, but still possible if you’re early in your loan, you have a lot of equity in your ride, or you’re moving from a new vehicle to a used one with a significantly lower price point.

  • Longer Warranty: If parts of a new vehicle break or fail to operate properly, you can typically get them replaced at little to no charge through most manufacturer warranty programs for a set period of time.

    As of 2019, Hyundai and Kia offered one of the best all-around warranty programs, with full 5-year/60,000-mile coverage and powertrain coverage up to 10 years or 100,000 miles (whichever comes first). If you bought a brand-new Kia, you’d have that entire time under warranty, while if you keep your three-year-old model and refi, you’d have less time left where repairs are covered.
  • Increased Fuel Economy: With gas prices rising, many drivers are looking to optimize their fuel economy. Though we’re still not at the 65 MPG many European models get, American cars have increased in fuel efficiency over the last decade. If you’re driving a gas-guzzler or want to switch to hybrid/electric, fuel cost savings could potentially make a new set of wheels your best option!
  • More Gadgets: Maybe you could care less if your truck has a backup cam and side-mirror sensors or your sedan can park itself. But if you’re the type who lines up at 3 a.m. to buy the next iPhone and wouldn’t dream of having a car without the latest tech, you may want to upgrade to a newer model vehicle with all of the bells and whistles you want.

Whether you refinance your ride or replace it with a new one, it’s always a smart move to prepare your financing in advance. That way, if a salesperson doesn’t offer you the exact monthly payment and loan terms you want, you can be prepared with a lender you trust already lined up and ready to finance your sweet new wheels!

1The cash back is paid based on 1% of the total loan amount ($10,000 minimum), not including any additional loan dollars toward ancillary products (Guaranteed Asset Protection [GAP], Mechanical Breakdown Protection [MBP]). The cash back will be deposited into your Desert Financial savings account within one business day of the loan funding. Maximum cash back amount is $500. Cash back amounts are subject to all applicable taxes and are the responsibility of the member. Offer is available for the refinancing of non-Desert Financial auto loans only and is valid for a limited time only. 2First payment may be deferred for up to 90 days from loan date. Your loan will accrue interest during that time. Some restrictions apply. See a representative for details.

It's decision time!

Refinance your ride or buy a new one today.


The material presented here is for educational purposes only and is not intended to be used as financial, investment, or legal advice.