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Refinance Auto Loan

Mark Cappel
UpdatedApr 9, 2010

I want to buy a new vehicle. Can I just transfer the balance of my existing loan onto the new vehicle?

I recently bought a used car for $19,000 and now I am interested in selling it. I have a loan on it for $6,000 and the new car I am looking at costs $17,000. I was wondering if there was a way to transfer the loan to the other car without canceling it.

In general, most lenders will not refinance their own auto loans, so do not be discouraged if your original lender refuses to refinance an auto loan. Typically auto refinancing is done through a different lender where the new loan pays off the original loan. See the auto loan savings center to get started on a vehicle loan.

What you are proposing sounds trivial to accomplish on the surface, but is actually much more complicated. Your existing vehicle, which I will call "Vehicle 1" is secured by your auto loan. When you applied for the loan, the bank or finance company compared the amount of the loan to the value of the vehicle. In your case, the amount of the loan is about 30% of the market value of the vehicle, and as a result gave you an attractive rate.

If you look at the title of Vehicle 1 you will see your name on it plus the name of the bank or finance company. Vehicle 1 is the security for your bank or finance company. You can sell Vehicle 1 only with the permission of the bank or finance company. If you default on your loan the bank or finance company has the right to repossess Vehicle 1 because it is the security for the loan. When you retire the loan the bank or finance company will ask your state's department of motor vehicles to issue a new title in your name only.

Your scheme would require that your bank or finance company agree to issue a new title in your name only in the expectation that Vehicle 2 would be titled in both its name and yours. The bank or finance company would have to take it on faith that you would title Vehicle 2 in both names. The bank or finance company would also be saddled with holding Vehicle 2 as a security, which may or may not be as much as Vehicle 1.


Sell Vehicle 1 and retire the loan. Your credit score should receive a boost from your doing so. Buy Vehicle 2 and finance the portion you cannot afford with a new loan.

I hope this information helps you Find. Learn & Save.