Loan refinancing is nothing new, people has been refinancing their mortgages to lower their interest rates and to consolidate debts for a long time. But it is fairly recently that the option of refinancing an auto loan has been offered. Even though car loans are typically much smaller than mortgages, it can still be a smart choice to save money.

As cars are becoming progressively more sophisticated, they are also becoming more expensive. The average size of auto loans in the US is around $20,000 and that poses an opportunity to save money. For example, a few years ago car loan interest rates were as high as 9.25%. By refinancing your auto loan at a new rate of around 6%, you can theoretically save up to $1,500, which is a nice chunk of change for anybody.

Your decision to refinance or not should be taken carefully, and among the factors to consider is the term of the loan. If your loan is a short term loan, refinancing will probably not save you all that much. On the other hand, if the loan is for a longer term, as the case is with most expensive cars, making use of car loan refinancing can prove to be a good idea.

If you bought your car more than a year ago, it might be time to look into opportunities to obtain a lower interest rate. There will probably be some costs involved in getting a new auto loan, like the transfer of the loan papers to the new finance company. Make sure you gather all the facts about costs, effective interest rates and such before signing anything. And then do the math carefully to be certain that you will in fact save money over the life of the loan.