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Consider that the average U.S. monthly auto payment for a new vehicle is now $756 and for a used one is $559 as of mid-2025, according to data from Edmunds. And some car buyers are opting for 84-month loans as opposed to the more traditional 60-month loan terms.

Seven years is a long time to be spending $756 per month.

Avoiding having to make regular car payments, however, isn’t easy. Even reducing the amount is tough. Often, it comes down to either trading in your current car for a more budget-friendly car payment or refinancing your vehicle at a lower interest rate, which could lower the amount of your monthly payments if you also choose to extend the term. Keep in mind, though, that extending the loan term could make it so you pay more money in interest over the life of the loan.

What’s a better option for you? Here’s intel on whether a trade-in or a refinancing deal can be the right move.

Refinancing an Auto Loan vs. Trading in Your Car

If you’re finding that your car payments are too high, you might be looking for ways to reduce them. Among your options are refinancing your car loan or trading in your car for a cheaper one (which can also involve refinancing your loan). Both strategies can help you reach your goal of shelling out less every month. But each one has its unique features, and it’s worth understanding them both before you make a decision.

This table can help explain some of the differences and similarities:

What It Means to Refinance a Car

Refinancing an auto loan means getting a new car loan that replaces your old one, ideally at a lower interest rate.

The new loan pays off the old loan in its entirety. It also offers you new payment and interest rate terms that could result in lower monthly auto loan payments, thus potentially freeing up money for other household financial uses and obligations.

You might consider when to refinance a car loan if you have built your credit score (which might lead to better deals on loan interest rates) or if your original auto loan deal came with a high interest rate and rates have since dropped. You may even refinance to a longer loan term to reduce your monthly payments, though that likely means you will have to pay more in interest over the life of the loan.

Recommended: Which Credit Bureau Is Used Most for Auto Loans?

Pros and Cons of Refinancing an Auto Loan

Like any consumer loan, an auto refinancing deal has its upsides and downsides.

Pros of Auto Refinancing

Naturally, there are many potential benefits of refinancing a car:

•  May be easy to get. Banks and lenders are usually amenable to refinancing your auto loan. As long as your credit score is stable, most auto loan financing companies will be open to redoing your car loan. This can also be a con, however, if you start chasing interest rates and don’t pay attention to loan fees and terms. It’s wise to compare interest rates at your own financial institution (after all, it knows you best) and online with an auto loan aggregator that can tailor a loan package to your financial needs.

•  Can lower your interest rate. A lower interest rate can save you money. Saving money is the name of the game with auto refinancing and that game starts with a lower interest rate on a refi auto loan than the one on your original auto loan deal. In general, if interest rates are lower than they were when the car was originally purchased or if your credit has been positively impacted since you signed off on the first loan, chances are good that you can earn a lower interest rate by refinancing.

•  Can stretch out auto loan payments. By refinancing, you can also change the repayment terms and timetable of your original loan. Say, for example, your original loan stands at 36 months. By refinancing into a 60-month, 84-month, or even 144-month loan repayment, you should be able to cut your monthly payments down to size. Just bear in mind that this will likely mean that you pay more in total interest over the life of the loan.

Cons of Auto Refinancing

There are also potential disadvantages that can come with refinancing your car loan:

•  Longer loan terms can cost you. If you do refinance into a new auto loan with a longer repayment timetable, you’re running the risk of adding to the total cost of the vehicle. That’s because the total repayment for a shorter loan (say, 36 months) is less expensive than the total for a long loan (say, 72 months) because the total loan is paid down more quickly, meaning total interest costs are lower on a shorter loan.

•  Depreciation may cost you. Auto lenders may not want to lend you money for a car that’s not worth the cost of the loan. Unfortunately, vehicles — even brand-new ones — depreciate rapidly. If you purchased a car with low or no down payment, or if the vehicle has aged and lost much of its value, it could be an uphill climb getting a new auto refinancing loan.

•  Your old loan may cause problems. It’s much more difficult to refinance an auto loan if you’ve missed payments on your original loan (that makes you a high credit risk in the eyes of lenders). And you may be less willing to refinance if your original auto loan has a prepayment penalty (which can add to the total cost of refinancing into a new loan). Check the fine print on your old loan and make sure you’re caught up on payments before applying for a new auto refinancing loan.

Recommended: Is an Auto Loan Secured or Unsecured?

What It Means to Trade in a Car

Trading in your car means switching out an old vehicle for a new one.

Auto consumers trade in their cars for myriad reasons. Most relevant here, they may use their trade-in vehicle as a financial asset to curb the price of a new car purchase.

In this scenario, the value of your current car matters to the auto dealer. If you owe less money on the vehicle than an auto dealer is willing to offer you as a trade-in, that dealer may likely take the cash overage on your trade-in amount and apply it to your new vehicle purchase. One note of caution: If you owe more on your old car than its estimated value, you likely won’t succeed in getting a good trade-in deal. Or you may need to pay off the difference in cash or have it tacked onto your new loan.

Auto consumers may also trade in their vehicles because they can’t afford the payments any longer but still need a vehicle. In that scenario, trading in a more expensive vehicle for a less expensive one can take the financial pressure off a car owner, while still giving them a vehicle to drive.

Recommended: Should You Pay Off Your Car Before Trading It In?

Pros and Cons of Trading in a Car

Just as with refinancing, there are several pros and cons involved in a vehicle trade-in, too. That is especially true if you’re doing so to save on auto payments.

Pros of Auto Trade-Ins

There are many potential benefits to trading in a car:

•  Can be fast. You can close on a trade-in in just one day. Simply drive to the dealer lot or use an online platform like Carvana, CarMax, or AutoNation, get an offer on the trade-in, and close the deal. Remember, auto dealers are in the business of getting you into a new vehicle and a trade-in is a perfectly appropriate way to do that. Dealers are also adept at selling your old car at top value, so the financial incentive for cutting a deal with an auto dealer is fairly high. That’s all in your favor when you’re trading in a vehicle.

•  You get a second bite of the “new car” apple. When you trade in your old car, you have another chance to get a car with the features you want, such as four-wheel drive, more trunk room, or better gas mileage. While it’s true that your trade-in vehicle was probably worth more than the new vehicle you’re getting, there’s no reason your new set of wheels can’t have features you like, but that you weren’t getting in your old car — within reason.

•  A fresh start on a new loan. When you trade in a newer car for a less expensive one, chances are you’re going to wind up with a lower auto loan payment — and that may be the biggest “pro” of all. Whether you’re just stretched for cash or you’ve suffered a negative life event, like job loss or expensive divorce, a new auto loan that’s less expensive can help you get a fresh start financially and provide you with a decent car to drive.

Cons of Auto Trade-Ins

Naturally, there are potential negatives, too:

•  You can’t expect a boatload of cash. Auto trade-in consumers should be realistic about the value they’ll get on a trade-in deal. Auto dealers usually don’t like to pay full price in the first place. Plus, the dealer has to ensure that the trade-in vehicle will pass inspection, detail the vehicle thoroughly, and get it ready for resale. Consequently, it’s a good idea to expect to get a decent value for a car that’s in good condition, but don’t expect to win the lottery. One rule of thumb: Expect to get, say, 10-15% lower than the vehicle’s estimated value on a trade-in — even for a car that’s in good shape and ready to sell.

•  There may be fees. Vehicle trade-in deals can come with hefty fees, including documentation fees, vehicle registration fee, and sales tax, among other expenditures. In general, any additional fees that come with a new vehicle purchase should be added to your trade-in budget.

•  Potential scams. Not all auto dealers hold themselves to high ethical standards. In some situations, a dealer may try to “bait and switch” you into a different car that doesn’t meet your driving and financial needs. Or, the dealer may threaten to back out of accepting your trade-in vehicle if you don’t agree to strict terms on a new vehicle. Be patient, read all the contract paperwork the dealer is obligated to provide (or have a trusted attorney or auto financing expert do it for you), and be prepared to back out of a deal at the sign of any unagreed-upon financial risk. That may represent a hassle in the short term, but pulling back from a lousy deal can pay big dividends in the long run.

Which Is Better for You – an Auto Refinancing Deal or a Trade-In?

Deciding between a refinancing opportunity or a trade-in depends on the deal you’re getting and whether or not that deal represents your best financial move and your best vehicle-ownership move.

In general, getting a lower rate on a refinancing deal can save you hundreds or (depending on the rate and the loan) even thousands of dollars. If your car is reliable and meets your needs, this may make sense for you.

However, trading in a vehicle that’s too expensive to own and maintain for a lower-priced vehicle that’s still dependable on the open road can save you money and provide the safety you require when getting behind the wheel. Or, if you really just can’t afford the car you have anymore, then trading it in may be the right choice for you.

The ultimate decision is up to you, so use the information above to make your auto ownership experience the best one possible for now and for down the road.

Recommended: What Are the Steps for Refinancing a Motorcycle?

The Takeaway

When you’re looking to lower your monthly car loan payments, you have choices. You can choose to trade in your current car for a less expensive one or refinance your current auto loan to lower your monthly payment (if possible). Keep in mind that you may have to extend your loan term in order to lower your monthly payment, meaning you’ll pay more in interest overall.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

What is a car loan refinance?

A car loan refinance is when you take out a new car loan to pay off your old car loan. Typically, you would do this if you can get a better interest rate or loan term on the new loan and if you can lower your monthly loan payments.

What is a trade-in?

A trade-in is when you give a car dealer your old car as part of the payment for another car you want. This will likely be just part of the financing package, which will probably involve another loan, too. Typically, you might do this when your current car is too expensive for you or you need to reduce the size of your monthly payments.

Is it better to refinance a car or trade it in?

This is an individual assessment, but if you like your car and simply want to take advantage of lower prevailing interest rates or an improvement in your credit score since you originally financed your car, you might want to consider refinancing your car. If your car is too expensive for you or you don’t like it and you would be happy with a less expensive car, trading in your car might be a good choice for you.

How do you trade in a car you still owe money on?

Typically you can trade in a car you still owe money on. If the car is worth more than the amount you still owe, typically the difference will be applied toward reducing the size of your new loan. It can be trickier if your car is worth less than you still owe (i.e., the loan is underwater). In this case, you will have to pay off the difference or roll it over into your new loan, which may not be financially prudent.

Photo credit: iStock/andreswd

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-100

Auto loans are available through both car dealerships and private parties, though getting a loan through a private party may take a bit more legwork.

While private party auto loans tend to have higher interest rates than their dealership counterparts, private party auto sales often occur at lower overall price tags, and the trade-off might be worth it for you.

Here’s what you need to know about private party auto loans, including where you can find them, their typical rates and terms, and how you can apply for one.

Private Party Auto Loan Defined

A private party auto loan is when a bank or financial institution lends a car buyer money to purchase a used vehicle off the private market. A borrower might use a private party auto loan to buy a car from a person they found on Craigslist or from a friend who’s looking to sell their car.

Like most vehicular loans, a private party car loan is generally a secured loan — and the collateral for this auto loan is the car you’re purchasing. That means if you default on your payments, the lender can repossess your car.

Private party auto loans charge interest as an annual percentage rate, or APR, which can add up over the term, or length, of the loan. Loan terms may be anywhere from 12 to 84 months long.

Keep in mind, though, that private party auto loans often come with higher interest rates than their dealership counterparts. These loans can also have eligibility limitations when it comes to the vehicles themselves — cars over a certain age or mileage may not qualify.

Where to Find a Private Party Auto Loan

Private party auto loans are available from a variety of financial institutions, including big, national banks as well as smaller regional credit unions and online lenders.

Because you’ll need to seek out the loan on your own, rather than simply allowing the dealership to work with whichever institution it uses in-house, you’ll have the opportunity to shop around for the loan with the most competitive rates and terms. When shopping for an auto loan, lenders may require that you find the vehicle you want to buy before applying for a private sale auto loan.

Private Party Auto Loans vs Typical Auto Loans

The table below compares private party auto loans vs. typical auto loans:

Factors Affecting the Interest Rate of a Private Auto Loan

As with other loans, there are a variety of factors that can affect the interest rate of your private party loan, such as:

•  Your credit score

•  Your income and employment history

•  The age of the vehicle

•  The mileage of the vehicle

•  The length of the term

While private party auto loans do tend to have higher interest rates than the secured loans you’re likely to find at a dealership, they often have lower rates than personal loans, which are unsecured. So again, it’s all about weighing your options and deciding whether or not the option to finance a private-market vehicle is a worthy trade for you.

Recommended: Luxury Cars by Maintenance, Ranked

Pros and Cons of Private Party Auto Loans

Below, we highlight some of the pros and cons of getting a private sale auto loan:

Advantages of Private Party Auto Loans

•  They provide would-be car buyers with private sale auto loan financing

•  Can help you buy a used car at a bargain price

•  Your interest rate may be lower than unsecured personal loan rates

•  Can help you build credit

Disadvantages of Private Party Auto Loans

•  Lenders may require that you find the car you want to buy before applying for the private sale auto loan

•  Your interest rate may be higher than a typical auto loan

•  An auto loan for private seller purchases cannot be used to buy a new car from a dealer

•  The lender may not help you in the paperwork process of transferring the car title and registration into your name

How to Qualify for a Private Party Auto Loan

Like other loans, qualifying for a private party auto loan will depend on your financial factors, including your credit history, income, existing debts, and more. Lenders are trying to assess how much of a risk it is to put money into borrowers’ hands, and they use these indicators of past financial behavior in order to decide whether or not they think they’ll see the money back from you.

As usual, when it comes to private party auto loans, the higher your credit score and the lower your existing debt, the more likely you are to qualify for a loan with a lower interest rate. If you want to improve your odds of approval or secure a more competitive rate, there are steps you can take. For example, you could ensure that going forward, you make all payments in full and on time, as payment history is the biggest determinant of your score. You could also work on paying off debt to lower your credit utilization.

How to Apply for Private Party Auto Loans

To apply for a private party auto loan, you’ll need to supply the lender with your basic demographic information, including your:

•  Name

•  Date of birth

•  Address

•  Social Security number

The application will likely also ask about your employment history and income, as well as any current debts you pay (including your mortgage or lease payment).

Additionally, you’ll need some details about the car you’re interested in purchasing, too, including its:

•  Make and model

•  Year

•  Mileage

•  Vehicle identification number (VIN)

Depending on the lender, you may also be asked to provide:

•  The bill of sale or buyer’s order detailing the terms of the purchase agreement

•  A copy of the vehicle’s title and registration

•  Written payoff quote from the seller’s lender, if the car is still under lien on their side

Should You Use a Private Party Auto Loan to Refinance Your Car?

Along with purchasing a car in the first place, you might be interested in finding a new loan to refinance a car you’ve already purchased. Auto loan refinancing may be right for you if you can secure a lower interest rate.

However, private party auto loans are specifically for private party sales and may not be helpful for those looking to refinance. Additionally, with their higher interest rates, they might not save you money in the long run — which is typically the main reason to refinance.

Recommended: Guide to RV Financing

Are There Private Party Auto Loans for Bad Credit?

If you have bad credit, you can still often get a car loan for a private sale. However, these borrowers may not qualify for a lender’s best rate of interest.

Deep subprime borrowers, for example, had an average auto loan rate of 21.58% on used vehicle financing in mid-2025 compared with 6.82% for superprime borrowers with excellent credit scores between 781 and 850, Experian® data show. This means that a person with any credit score can obtain used car loan financing, but the interest rates will vary tremendously.

Recommended: Auto Loan Refinance Calculator

Alternatives to Private Party Auto Loans

Here are some alternatives to private sale auto loan financing that you may consider:

•   Indirect financing through a dealership

•   Borrowing money from friends or family to buy a car

•   Using a personal loan to buy a car

•   Buying the vehicle outright with cash

•   Getting a short-term car lease

Recommended: Refinancing Car Loans on Social Security Disability

The Takeaway

Private party auto loans make it possible to finance a vehicle purchased on the private market, but it’s important to understand that these loans do tend to have higher interest rates than their dealership counterparts. However, their interest rates are still usually lower than the rates on unsecured personal loans — so if you’re committed to buying on the private market, a private party auto loan may work for you.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Do you have to take out a private party auto loan if you are buying from a private seller?

No, you don’t have to take out a private party auto loan if you are buying from a private seller. Consumers with sufficient cash on hand can buy a vehicle from a private seller outright. Consumers can also take out a personal loan or borrow money from other sources to buy a car from a private seller.

How are private party auto loans different from other auto loans?

You cannot use a private party auto loan to buy a new car from a dealer, whereas other auto loans can help you buy new or used cars from a dealer. Private party auto loans also typically come with higher interest rates than loans you’d secure at the dealer.

How big can a private party auto loan be?

A private party auto loan can be equal to 100% of the vehicle’s sale price. If the private owner of a used luxury car sells the vehicle for $50,000, your private party auto loan could be up to $50,000 to buy the vehicle with 100% financing. Some lenders, however, may not be willing to offer 100% financing on a vehicle that may depreciate in value.

Can I get a car loan for a private sale?

Yes, you may get approved for a private party auto loan if you meet a lender’s underwriting standards. Borrowers with bad credit can get approved for private sale auto loan financing, but these borrowers most likely won’t qualify for a lender’s best rate of interest.

Photo credit: iStock/Wasan Tita

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-099

Owning a car means eventually having to pay for car repairs. The costs of repairing a car can range dramatically, depending on such factors as the type of car you own, the specific repair job that needs to be done, and the cost of labor in your area. According to AAA, the average cost of common repairs is $792 a year, but the prices can run significantly higher than that. In fact, you might be looking at a bill for well into the thousands of dollars.

Read on to learn about the most expensive car repairs and how to pay for them.

Which Cars Cost the Most to Repair and Maintain?

Some cars cost more to maintain than others. They may have parts that are expensive to replace and require specialized mechanics to work on them.

According to a recent study by Motor1.com, Porsche and BMW are the most expensive car brands to repair.

Recommended: Luxury Cars With the Lowest and Highest Maintenance Costs

The Most Expensive Types of Car Repairs

What are the most expensive car repairs? Below are the repairs that are typically the highest. The price you’ll pay for the most expensive car repairs can vary greatly. The final bill depends on such things as the make and model of the car, the type of mechanic required to do the job, and the cost of labor in your area.

Recommended: Car Make and Model Explained

The Engine

You might expect engine repair to be a significant cost and it is. If several parts of the engine need to be repaired, you may need a whole new engine. An engine replacement cost could start at $4,000 and go much higher. Checking and changing the oil regularly may help maintain the life of your engine.

The Head Gasket

The head gasket seals your car’s engine cylinders so that coolant and oil don’t leak. If the head gasket isn’t functioning properly, the engine can overheat, resulting in serious damage to the car. A head gasket repair cost can be more than $2,000. Check the seal on your head gasket on a regular basis to make sure it’s in good shape, and take it in for service if you notice any issues.

The Transmission

The transmission moves power from the car’s engine to its wheels, so repairing it is critical if problems arise. A transmission repair can cost between $400 and $1,400. However, the transmission replacement cost can range from about $2,000 to $7,000, making it one of the most expensive repairs on a car

To help keep your transmission healthy, change the transmission fluid as directed by your car’s manufacturer. If you have a car with a manual transmission, don’t ride the clutch too hard or too often when shifting.

The Brake Line

The brake lines are what make your brake pedal operate properly to bring the car to a stop. Over time, brake lines can rust and even disintegrate. If you need to replace them, the brake line replacement cost is about $1,000. To help prevent the brake lines from rusting, you can coat them with an anti-rusting agent.

The Camshaft

The camshaft opens and closes the engine valves so that air and fuel can go in and out of your car’s combustion chambers. Typically, this part rarely needs to be replaced, but if dirt buildup causes the camshaft to break down, repairing the camshaft can cost at least $3,000. Taking your car in for regular service and oil changes can help keep the camshaft operating the way it should.

The Catalytic Converter

A catalytic converter is part of your car’s emission system, and helps lower the amount of harmful substances released into the air. A catalytic converter cost can vary widely, ranging from $200 to $2,000, depending on the vehicle’s make, model, and year.

The Suspension

A car’s suspension stabilizes and controls the car, helping it drive over bumps and dips in the road. Rust or hydrogen can weaken the suspension springs, causing them to collapse. Repairing a car’s suspension costs approximately $1,000 to $5,000.

Recommended: Should You Pay Off Your Car Before Trading In?

Airbags

Once these crucial pieces of safety equipment are deployed in a crash, they need to be replaced. Replacing the airbags in your car will cost between $1,000 and $6,000, depending on the severity of the crash.

Air Conditioner Compressor

This is the heart of your car’s air conditioning system. It pressurizes and pumps refrigerant into the condenser to help cool the car. If your air conditioner compressor breaks, it typically costs around $800 to $1,500 to repair it.

Hybrid Car Battery

Hybrid car batteries power the car’s electric motor, which propels it at lower speeds and allows it to use less fuel. A hybrid car battery pack lasts, on average, 80,000 to 100,000 miles. Replacing hybrid car batteries cost between $2,000 and $8,000. This is another one of the most expensive repairs on a car.

Recommended: How Long Does a Car Battery Last?

Fuel Pump

This crucial part pumps fuel from the gas tank to the engine to power your car. Repairing a fuel pump can cost around $1,000.

Alternator

If your car’s alternator breaks, your car’s electrical system will give out. Alternators generally need to be replaced every 50,000 to 100,000 miles. A new one costs approximately $350 to $900.

Recommended: How Much Does Fixing a Power Steering Pump Cost?

5 Ways to Cover Car Repair and Replacement Costs

Now that you know what the most expensive car repairs are, you might be wondering how to pay for them. There are a few different payment options you can consider for covering car repair and replacement costs. These include:

Cash

You could take cash from your savings or checking account to pay for car repairs. You might even have an emergency fund set up to cover sudden and unexpected expenses like this. And, of course, you won’t have to pay any interest if you use cash for the repairs. However, if the repair is expensive, it could deplete your savings reserves, which isn’t ideal.

Credit Card

You might opt to use a credit card as an easy and convenient way to pay for a car repair. Some credit cards have added benefits like credit card rewards and the ability to earn points on your payment. However, credit cards often have high interest rates, so it’s smart to pay off the balance as quickly as you can.

Using a Personal Loan

You can take out a personal loan to pay for your car repair. Personal loans can be used for a variety of purposes, including car repairs. Once you’re approved for a car repair personal loan, you’ll receive a lump sum of money, typically within several days, and you’ll repay the loan over time with interest.

The higher your credit score, the lower the personal loan interest rate you may qualify for.

Auto Loan Refinancing

Getting an auto refinance loan is another way to pay for expensive car repairs. As long as you have enough equity in your car, an auto refinance replaces your existing loan with a new, possibly larger, loan. You can use the additional money to pay for the car repairs. Plus, you might be able to get a lower interest rate and more favorable terms. Again, a higher credit score may help you qualify for a lower interest rate.

However, be aware that lower monthly payments might extend the length of the loan, which could cost you more in interest overall. You can use a car loan refinancing calculator to help determine if auto loan refinancing makes sense for your situation.

Recommended: Determining the Value of a Motorcycle

The Takeaway

The most expensive car repairs can cost thousands of dollars and put a major dent in your budget. Getting your car serviced regularly, and maintaining it as directed by the manufacturer, may help keep it running smoothly.

When the need for repairs does crop up, there are a number of different methods you can use to help cover the cost, including cash savings, a credit card, a personal loan, and refinancing your current auto loan.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

What is the hardest repair on a car?

Repairing or replacing an engine might be one of the toughest repairs on a car. However, it depends on the type of car, the mechanic, and the level of repair needed.

What car parts fail the most?

The car parts that fail the most often include the brakes, shock absorbers, timing belts, alternator, battery, and water pump. These parts tend to get worn out over time.

What is the longest thing to fix on a car?

The engine and the transmission typically take the longest to fix on a car. Replacing these components can take a mechanic approximately 10 to 12 hours of work and may require your car to be in the shop for a couple of days or longer.

Photo credit: iStock/Kunakorn Rassadornyindee

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-098

If you fail to make your auto loan payments, your lender can repossess your car. While repossession can feel pretty final, you may still have responsibilities to your lender. In fact, you may still owe them money in the form of a deficiency balance.

Keep reading to learn more on auto loan deficiency balances and what your obligation is to repay the lender.

How Does a Deficiency Balance Work?

When you take out an auto loan, your lender will use your vehicle as collateral. If you fail to pay off the loan, they can repossess the vehicle and sell it to recoup their losses. Unfortunately, selling the vehicle doesn’t always cover the balance of the loan, and you may be on the hook for paying the difference, otherwise known as the deficiency balance on an auto loan.

Repossession of Car

Your lender holds on to possession of your vehicle title until you have paid off your auto loan, at which point the title is turned over to you. In the meantime, your lender allows you to use the vehicle as long as you’re making on-time payments. If you are delinquent on your loan, your lender can begin taking steps to repossess your vehicle — though repossession generally doesn’t take place until a loan has been in default for 90 days.

Lenders will usually let you know when you’re in default and that your car is at risk of being seized. However, they can repossess vehicles without notice, and they don’t need to have a court order to do so.

Repossession Sale

Once a lender has repossessed your car, it’s unlikely you’ll be able to recover it, though some states allow a certain period of time during which you can reinstate your car loan. This usually involves paying your lender’s repossession expenses on top of past-due loan amounts.

If your state doesn’t offer this option or you choose not to take advantage of it, your lender will sell your former car to recover the money you owe, usually at auction. By law, lenders must put a “commercially reasonable” amount of effort into the sale of the vehicle. However, those attending the sale are often car dealers whose incentives lie in keeping prices as low as possible. That means a car could easily sell for much less than it’s worth.

Once a sale goes through, your lender subtracts the sale price from the balance of the loan. They’ll then add the costs of repossessing, storing, and selling the vehicle. The resulting amount is the deficiency.

Generally speaking, your lender must send you a notice that the car will be sold, including the date, time, and place of the sale. They must also let you know if you’ll be liable for any deficiency after the sale and provide contact information you can use to find out how much you owe.

Recommended: Can You Refinance Your Car Loan After Repossession?

What to Do If You Owe A Deficiency Balance

Some states place restrictions on whether or not you’ll need to pay a deficiency. For example, balances under a certain dollar amount may be exempt. Other states have no such rules.

In some cases, you may be able to negotiate with the lender to modify the deficiency balance. Otherwise, you’re required to pay it in full.

Recommended: What Is a Balloon Auto Loan?

What Happens If You Can’t Pay A Deficiency Balance?

If you can’t pay a deficiency balance in full, contact your lender immediately. You may be able to work out either a settlement with them or a repayment plan:

•  Settlements: Settlements are often a smaller percentage of what you owe. Generally, you’ll need to be able to prove some financial hardship, such as being laid off, disabled, or unemployed. Settlements, when accepted by the lender, typically must be paid in full.

•  Repayment plans: These may allow you to pay off the debt in regular, more manageable increments.

If you refuse to pay off the balance, lenders may sell the debt to a collections agency or they may file a lawsuit against you. This might result in a lien or wage garnishment.

Should you get sued, you may have legal recourse. You may not have to pay off a deficiency balance if you live solely off federal benefits, for instance. You also may defend yourself against a suit if you can prove that the lender did not make a commercially reasonable effort to sell your former vehicle.

In some extreme cases — especially if this isn’t the only debt you’re struggling to pay — you may consider filing for bankruptcy. This may allow you to discharge unsecured debts, including deficiency balances.

Recommended: Can You Refinance a Car Loan With Bad Credit?

How Long Do You Have to Pay a Deficiency Balance?

If you owe a deficiency balance, your lender will typically contact you immediately and let you know the date by which the balance must be paid.

Recommended: What Type of Credit Is an Auto Loan?

Does a Deficiency Balance Affect Your Credit?

A deficiency balance does not bode well for your credit score. In fact, you can face repercussions at multiple points along the way.

For one, the circumstances leading up to the delinquency balance will typically harm your score. That’s because your track record of paying your debts on time is the biggest factor in calculating your credit score. As such, late payments will have a negative impact on your score.

Your score will take another hit when you default on the auto loan, and again when the car is repossessed. A repossession will stay on your credit score for seven years. A voluntary repossession of the vehicle may have a less severe impact.

If you refuse to pay your balance and the debt is sent to a collections agency, your credit score can take another negative hit. The collections account will also stay on your credit report for seven years.

Recommended: Which Credit Bureau Is Used Most for Auto Loans?

Avoiding a Deficiency Balance

The best way to avoid a deficiency balance on an auto loan is to be sure to make your auto loan payments on time and in full. If you’re having trouble making payments, talk to your lender immediately — they may be able to help make the debt more manageable.

Other ways to manage debt include debt consolidation loans or refinancing your auto loan.

The Takeaway

If you default on your auto loan and your lender takes back your car, a deficiency balance is an unfortunate probability you may have to contend with. A deficiency balance is the difference between the sale price of the car after repossession and what you still owe on an auto loan. Except in rare circumstances, you’ll likely have to pay off this balance right away. Doing so can help protect your credit score from further damage.

To avoid this ramification of defaulting on your loans, it’s important to stay on top of managing your debt and do everything you can to make on-time payments.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

How long does a deficiency balance last?

An auto loan deficiency balance lasts until it is fully paid or resolved, as lenders can pursue collection indefinitely in many states. However, some states impose a statute of limitations, typically ranging from three to 10 years, after which the lender may no longer legally enforce collection actions.

What happens after you’ve paid a deficiency balance?

Once you’ve paid off your deficiency balance, you’re under no further obligation with your lender.

How do you negotiate a deficiency balance?

Call or write to your lender and ask them to settle for a lower amount that you can reasonably repay. Be prepared to prove financial hardship if your lender asks. If you’re uncomfortable negotiating the debt yourself, you may want to engage an experienced attorney.

Photo credit: iStock/Pla2na

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Your car’s radiator helps keep your engine cool and functioning. Overheating can damage an engine, which can eventually lead to engine failure. If you notice your radiator is failing, it’s critical to the health of your vehicle that you repair or replace it as soon as possible.

The average cost to replace a car radiator can range from $750 to $1,850, depending on car make and model. Radiator repair is often far cheaper, costing $250 to $750, on average.

Here’s a closer look at what a car radiator does, the factors that affect the cost of repairing or replacing a radiator, and how to pay for the fix.

Car Radiator Repair and Replacement Cost Breakdown

The cost of radiator repair or replacement will depend on the cost of parts and the cost of labor.

On average, auto mechanics in the U.S. charge $75 to $130 per hour, though rates will vary depending on where you live. A mechanic in a big city will likely charge more than one on the outskirts of town to help cover the increased cost of things like real estate, utilities, and labor.

An experienced mechanic should be able to replace a radiator in two to three hours. On the high end, you could expect labor to replace a radiator to cost nearly $400. It may take much less time to have a repair done, such as replacing a radiator hose.

The rest of the cost of repair or replacement comes from the cost of parts. Replacing an entire radiator is more expensive than replacing worn out parts.

The cost of parts is determined by the make and model of your car. For example, the price of parts for work on a relatively common vehicle, like a Toyota Corolla, will likely be much less than on high-performance luxury vehicles.

The type of part that’s required by your vehicle will also have an impact on price. Single core radiators are the most common radiators used in vehicles, but double- and triple-core radiators are more expensive if your vehicle calls for them.

Recommended: Luxury Cars With the Lowest and Highest Maintenance Costs

Getting an Estimate

When getting an estimate for a replacement or a repair, start by looking up average cost in the U.S. This will serve as a baseline that you can compare with estimates you receive.

Next, consider online resources, such as Kelley Blue Book’s Repair Pricing tool, that allow you to input the year, make, and model of your car and the repair you need. It will then tell you the price range you can expect in your area.

Finally, contact a handful of local mechanics, let them know the make and model of your vehicle, and ask them for a quote. Look for reputable mechanics by seeking recommendations from friends and family, and look up local shops with the Better Business Bureau to see if there are any complaints or shops you should avoid.

Recommended: Suspension Repair and Replacement Guide

What Does a Radiator Do?

When your engine is running, the temperature inside the cylinder can reach more than 260 degrees Fahrenheit. With temperatures so high, the engine must be cooled so that it doesn’t overheat.

This is where the radiator comes in. The engine in your car has what’s known as a cooling jacket. Radiator fluid circulates through the cooling jacket and is pumped to the radiator where it is cooled down before circulating again.

Recommended: The Costs of a Replacement Engine

Why Do Radiators Fail?

Radiators fail for a variety of reasons. For example, there could be corrosion or buildup that blocks the cooling system and eventually causes the radiator to malfunction. Drivers can work to avoid this by flushing their radiator system and coolant every year.

In addition, radiator seals can become brittle over time and crack, which can cause coolant to leak. Or, faulty temperature sensors can cause the radiator itself to overheat, which can potentially cause failure.

Signs of a Bad Radiator

Look out for the following signs that your radiator is in need of repair or replacement:

•  An overheating engine. This may be caused by low coolant or a blockage in the radiator system.

•  Coolant leaking on the ground. This may be a sign of a cracked or punctured component of the radiator system.

•  A sweet smell. A sickly sweet smell coming from the front of your car may be coming from leaking radiator fluid.

•  Dashboard warning. There may be a light on your dashboard that warns of low coolant.

•  Sludgy buildup. The coolant in your radiator should be bright in color. If it’s rust-colored or thick like a milkshake, it may be a sign that your radiator is failing.

Recommended: Guide to Transmission Replacements

Can I Drive With a Bad Radiator?

Your radiator is what cools your engine. If your engine overheats, other important parts of your engine, such as the cylinder, can get damaged and eventually there could be catastrophic engine failure. As a result, it’s not safe to drive your car with a failing radiator and you should have the problem taken care of immediately.

Recommended: Car Make and Model Explained

How to Cover the Costs of a Radiator Replacement

With car radiator replacement costing nearly $2,000 in some cases, it can take some strategizing to figure out how to cover costs. You may consider the following options:

Pay With Cash

Cash is the least expensive way to cover the cost of an auto repair. On average, radiators need to be replaced once every 80,000 miles. While there’s no guarantee that your radiator won’t fail before then, as the 80,000-mile marker approaches, you may want to set money aside in a savings account to cover future radiator repairs.

If you don’t have cash on hand, you may turn instead to credit.

Use a Credit Card

Credit cards can be used to finance the cost of a new radiator. However, if you carry a balance from month to month, you’ll owe interest, and interest rates can be very high — up to 20% or more. What’s more, if you continue to carry a balance, you’ll start to owe interest on your interest, which can send you deeper into debt.

As a result, it’s best to only rely on credit cards when you know you’ll be able to pay them off at the end of each billing cycle.

Take Out a Loan

If you know you won’t be able to pay your credit card bill off right away, a personal loan for car repairs may be a cheaper alternative, offering lower interest rates. Personal loans allow you to borrow a lump sum of money that can be used for most purposes, including auto repair. You agree to repay that loan in monthly installments with interest.

Refinance Your Auto Loan

You may also consider refinancing your auto loan. When you refinance your loan, you pay off your old loan with a new loan, preferably one with a lower interest rate, which can save you money over the life of the loan. You can use these savings to help fund auto repair.

A car loan refinancing calculator can help you determine how much you might save.

The Takeaway

If you think something may be wrong with your radiator, it’s best to get it handled as soon as possible. Signs of a faulty radiator include your car overheating, a sweet smell coming from the hood, leaking coolant, and the warning light on your dashboard turning on.

With the cost of radiator replacements being close to $2,000, this is not an expense to be taken lightly. If you can pay cash, that will be the best option. If not, you can consider using a credit card, taking out a personal loan, or refinancing your current car loan to a lower interest rate or opting for a cash-out refinance, where you get cash out of the loan and can use that money to pay for car repairs.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Can I continue driving my car with a damaged radiator?

Driving with a damaged radiator should be avoided as it can cause your car to overheat. Have it fixed as soon as possible to avoid further damage to your engine.

Are there different types of radiators for different car models?

Yes, there are different types of radiators for different car models. For example, single-core radiators are most common, but some cars will use double- or triple-core radiators.

Can a car radiator be repaired, or does it need to be replaced entirely?

In some cases, damaged parts of a car radiator, such as radiator hose, may be replaced without the need to replace the whole component.

How long does it take to replace a car radiator?

Replacing a car radiator may be completed by a skilled mechanic in two to three hours.

Photo credit: iStock/Evgenii Palitsyn

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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