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The make and model of a car refer to the brand of vehicle and the type of product a car company is offering. For example, when you refer to a Honda Accord, you are referring to both its make, Honda, and the product the auto company is selling, their Accord model.

Understanding the difference between make and model is important. It has implications for what features you will be offered as a consumer, the cost of the vehicle, insurance rates, and financing.

What Is the Make and Model of a Car?

The make of a car is synonymous with its brand. It may also be the same as the manufacturer of the vehicle, but this is not necessarily the case. For example, while Ford is both a make and a manufacturer, the Ford Motor Company also owns Lincoln, which is another make.

The make of a car will typically offer a number of different models under its brand name. The model of a car is a specific motor vehicle that belongs to a make brand. The model helps you identify exactly what type of vehicle you’re getting. However, the model may also refer to more than one body style.

For example, the Honda Accord has been offered as a sedan, a hatchback, and a wagon. Models often include numbers to help differentiate between them. Any model of car can vary year to year, so using the year in conjunction with make and model can help you identify an exact product.

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Make and Model of Car Examples

Listed below are various make and model of car examples:

Make Examples

•   Acura

•   Audi

•   BMW

•   Chevrolet

•   Chrysler

•   Dodge

•   Ford

•   GMC

•   Honda

•   Nissan

•   Tesla

•   Toyota

Model Examples

Here are some of the most popular makes and models in the U.S.:

•   Ford F-Series

•   Chevrolet Silverado

•   Toyota Rav4

•   Tesla Model Y

•   Honda CR-V

Differences Between Vehicles of the Same Model

Make and model can vary depending on what year a car is produced and it can also encompass a number of different features, from body style to trim.

Body Styles

The make and model of a vehicle may be offered in a variety of body styles. Here are some common examples:

•  Sedan: Offers four doors and a traditional trunk and may come in a range of sizes from small to full-size.

•  Wagon: Has four doors, an extended roof, and a hatch door in place of a trunk.

•  Hatchback: Traditional hatchbacks have been made like small sedans with a hatch door in the back. Recently, manufacturers have been putting this feature on larger vehicles.

•  Sport Utility Vehicle (SUV): These tend to be tall, have a higher seating position, and offer more ground clearance than cars like sedans.

•  Pickup Truck: Offers a cab in front and an open bed in the rear of the vehicle.

•  Minivan: Built for carrying a lot of people and cargo, minivans tend to be tall, offer a lot of space, sliding doors, and a hatch in the rear.

Trim Level

Trim levels are essentially various versions of a model, each offering different features. Higher trim levels offer more equipment and may include the use of better quality materials in the vehicle interior. Examples are leather upholstery and higher-quality materials for flooring and side panels.

Recommended: Luxury Car Maintenance Costs

Model Year

The model year denotes the year in which a vehicle from a particular fleet is produced. Confusingly, manufacture often begins in the year preceding the model year. That’s why in 2025 you could already be seeing 2026 models appearing at car dealerships.

It’s important to pay attention to model years because models can undergo big design changes from year to year.

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Engine Size and Type

Cars of the same model may have different engine sizes and types. The engine size may be measured in liters, such as a 2.5-liter engine with four cylinders or a 3.5-liter engine with six cylinders. A smaller engine may generate better fuel economy than a larger engine, while a larger engine may generate more torque and horsepower.

The engine type of a vehicle can be gasoline or diesel. This is the case for models with an internal combustion engine. All-electric vehicles don’t have internal combustion engines and run on electric motors fueled by rechargeable batteries instead.

Recommended: Guide to Finance Charges on Car Loans

AWD vs Rear or Front Wheel Drive

Vehicles can have different drivelines, including all-wheel drive (AWD), rear-wheel drive (RWD), and front-wheel drive (FWD):

•  AWD vehicles have the means to distribute torque to all wheels on the vehicle.

•  RWD vehicles distribute torque from the engine to the rear wheels only.

•  FWD vehicles distribute torque from the engine to the front wheels only.

Quality of Interiors, Speakers, and More

Cars of the same model may have different interior features. Some versions of a car model, for example, may feature leather-trimmed seats with multi-stage heating. Some versions may feature more speakers than the base model, and premium versions may feature a sunroof.

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Why Is a Car’s Make and Model Important?

When choosing what car to buy, make and model are not only important considerations when deciding what features you want or need, but they also have a financial impact.

May Impact Auto Insurance

Before settling on a make and model, consider that more expensive makes are, in turn, more expensive to insure. That’s because luxury vehicles like BMWs or a Lexus are pricier to repair or replace than more economical cars like a Honda. Even buying a classic car can saddle you with high insurance premiums.

Insurance may also be pricier for factors associated with different models, such as horsepower. The more powerful an engine, the more it may cost to insure since it can be driven at higher speeds.

Using Finder® data, the table below highlights how the make of your vehicle can influence the insurance rate you pay:

Price of the Vehicle

Make and model will also have an impact on price. Of course, luxury brands will tend to cost consumers more to buy, as will models with extra features. Some makes and models hold their value longer than others, making them more expensive to buy on the used market.

Car Loan Terms

Because make and model have such a big impact on price, they will in turn have an impact on car loan requirements, including if you decide to refinance your vehicle.

More expensive vehicles may have higher monthly payments and might require you to take on a loan with a longer term, which can translate into more interest payments over time.

Auto Loan Refinancing

Your car’s book value, which is largely determined by make and model, may have a big impact if you decide to refinance your auto loan.

Lenders use a metric called loan-to-value (LTV) ratio to help them determine whether to refinance your auto loan. LTV compares how much you owe on your vehicle to how much your car is worth and must be considered when weighing the risks and rewards of refinancing.

If your car is worth less than the amount you owe, you may have difficulty securing refinancing. Consider how soon you can refinance to increase your chances of securing a favorable loan.

Getting a Title or Plates

The true cost of refinancing a car can include registration and title transfer fees. Some states may require you to re-register your car when you refinance. Some states may also charge a title transfer fee as the title moves from your old lender to the new one.

Taking a Vehicle in for Maintenance or Repairs

Taking a vehicle in for maintenance or repairs can be costly, but getting a cash out auto refinance can help you borrow money to cover such expenses. If you have sufficient equity in your car, a cash out auto refinance can replace your existing car loan with a larger-sized loan. The cash that you borrow from a cash out auto refinance may have few restrictions on how you may use the funds.

Recommended: Car Usage and Ownership Statistics

How Does Make and Model Affect Loan Refinancing Rates?

The make and model of a vehicle may have no impact or little impact on auto loan refinancing rates. Refinancing may give you a lower monthly payment by giving you a longer term or lower interest rate.

Here are some additional points to consider when evaluating whether refinancing is right for you:

•  Refinancing for a lower monthly payment in some cases may extend your term, and extending your term can saddle you with more interest charges over the life of your loan.

•  An auto loan refinance calculator can help you see whether a refinanced loan offer may increase or decrease your total interest costs.

•  Subprime borrowers may qualify for bad credit refinancing, but they are likely to qualify for steeper interest rates.

•  In general, average auto loan refinancing interest rates are lower for borrowers with excellent credit than borrowers with bad credit.

The Takeaway

Understanding make and model can help you buy a car that meets your needs in terms of capabilities and specifications. It can also help keep you on budget, offering insight into how much you’ll pay for insurance or what kinds of rates you might get if you take out or refinance an 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

How many different makes and models of cars are there in total?

There are dozens of car makes and hundreds of models, including high-maintenance luxury cars. It can be difficult to quantify the total number, considering there are numerous makes and models sold in the United States and around the world.

How do you find out your VIN?

You may find your vehicle identification number located on the driver’s side dashboard of your car. Your VIN may also be listed in your car registration and insurance documents.

What is the make and model of a car?

The easiest way to think of a vehicle’s make is to think of it as a brand name. A vehicle’s model further helps delineate what type of product you are buying from that brand. What is the model of a car? A model of car is a specific vehicle within the make brand.

What’s an example of the make and model of a car?

A Honda Civic is an example of a car make and model. Honda is the brand, and Civic tells you the type of vehicle the brand is offering. In this case, it is likely a compact sedan.

How do I find out the make and model of my car?

Take a look at the logos, emblems, and badges on the exterior of your car to determine make and model. Barring that, decoding your vehicle identification number (VIN) online may provide this information.

Photo credit: iStock/Scharfsinn86

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-Q325-090

When you’re shopping for an auto loan, it can be tempting to take out a loan with a longer term. That’s because the monthly payment can be substantially smaller than it would be for a loan with a shorter term. Getting more money in your pocket each month may well seem like a smart financial move.

But should you really opt for an 84-month auto loan? You could pay a higher interest and more interest over the life of the loan. Here, consider the pros and cons of a long-term car loan.

What Is an 84-month Car Loan?

An 84-month car loan is a financing agreement to buy a new or used vehicle with a seven-year loan offer. It’s also one of the long-term car financing options that exceeds the U.S. national average, according to Experian data.

The average car loan term was 68.48 months for new car financing and 67.41 months for used car financing, according to a recent Experian’s State of the Automotive Finance Market report.

Anything above the national average can be considered a long-term car loan, including 84-month and 144-month auto loan contracts.

Is an 84-month car loan bad? That depends on your personal circumstances. An 84-month car loan could be right for you if a seven-year loan term works best for you and your financial situation.

Potential Benefits of an 84-Month Auto Loan

There can be some advantages to choosing an 84-month car loan, depending on your unique financial situation:

Lower Monthly Payments

When shopping for a car loan, choosing a longer repayment length can mean a lower monthly payment. For example, a $30,000 loan with a 6% fixed interest rate would charge $579.98 per month if there was a 60-month term. But payments for the same loan amount with an 84-month auto loan would be $438.26 per month.

Ability to Purchase a More Expensive Car

You might be able to afford a pricier or more luxurious car by choosing an 84-month auto loan. Choosing a longer term can give you a lower monthly payment compared with choosing a shorter term.

More Chances to Refinance

With longer car loan terms, there’s more time to consider auto refinancing down the line. You can refinance for a lower annual percentage rate (APR), although you may pay more interest over the life of the loan if you refinance with an extended term.

You can even consider refinancing your auto loan with bad credit, especially if you find a cosigner whose credit is in good standing.

A More Flexible Monthly Budget

By opting for a smaller monthly payment, you could make more room in your budget for other financial goals. These might include the following:

•  Paying down high-interest debt

•  Putting away funds for retirement

•  Contributing to an emergency fund for unexpected expenses

0% Interest

An 84-month auto loan in some cases may include a 0% interest rate. Consumers with good credit may qualify for 0% APR auto loans.

In general, good auto loan interest rates fall under 7%. The average interest rate on new car loans in mid-2025 stood at 6.73%, according to Experian data.

Interest on car loans can depend on the following factors:

•  Does the loan use simple interest or precomputed interest?

•  Is the loan interest-free with 0% APR?

•  Does the loan have a fixed interest rate or a variable rate?

Simple interest auto loans and precomputed interest auto loans are among the different types of car loans available to consumers. A simple interest car loan charges simple interest on the outstanding balance of your loan each month, whereas precomputed interest auto loans charge interest based on upfront calculations.

A 0% APR car loan does not charge interest whatsoever. Finance companies affiliated with auto manufacturers may offer interest-free car loans as a sales tactic. These lenders, for example, may offer 0% APR on new cars of a specific make and model to entice consumers to make purchases.

Fixed-rate car loans have an interest rate that will never change over the life of the loan. Variable-rate car loans, meanwhile, have an interest rate that can fluctuate over the life of the loan depending on market conditions.

Consumers may wonder what happens to a car loan in case of death. The answer is that car loans do not simply disappear when a borrower dies. A surviving spouse may be responsible for paying the debt, or a lender may move to repossess the vehicle.

Recommended: What Questions to Ask When Refinancing a Car Loan

Potential Drawbacks of Taking on an 84-Month Auto Loan

After reading that list of pros, you might find yourself wondering if an 84-month car loan is ever a bad idea. Here are a few of the potential downsides and risks to securing an 84-month car loan:

Overall Higher Cost

While a lower monthly payment can be a benefit, it doesn’t necessarily mean lower overall costs. Unless you qualify for 0% APR, an 84-month auto loan typically costs more than a 60-month auto loan. That’s because paying interest over a longer term raises your borrowing costs.

Higher Interest Rates

Unless you qualify for 0% APR, 84-month car loans may feature higher interest rates than loans with shorter terms. A higher interest rate can translate into higher borrowing costs over the life of your loan.

The way car loans work is that lenders provide financing to help borrowers purchase a new or used vehicle. Borrowers are expected to repay the car loan over a set term, and these loans may include interest charges. Lenders may offer higher interest rates on long-term car loans and lower rates on loans with shorter terms to encourage clients to repay their debt more quickly.

Risk of Going Upside Down on the Loan

An upside down auto loan means that you owe more than the car is worth. When auto lenders shrink the monthly payment, it extends the amount of time you spend paying overall. The result? Building your equity in the vehicle may take a longer time, and it does say as depreciation typically increases.

A Lot Can Happen in 84 Months

While the average new-car loan length is a bit under 70 months, 84 months is seven years’ worth of your life. A lot can change in seven years — the length of your commute, the number of people using the car, wear-and-tear, repairs, and required maintenance. All of this could occur while you’re still on the hook for a long-term car loan, possibly without a warranty.

Not only that, you might start to notice newer vehicles sharing the roadways and feel the desire to purchase a fresher model or one with more advanced safety features. If you’re locked into an 84-month loan or owe more than your car is worth, you could be required to roll over what you still owe into a new loan just to purchase a new car.

Lack of Flexibility

Long-term car loans may limit your financial flexibility. Lenders may be unwilling to offer their best rates of interest on an 84-month car loan. An 84-month auto loan can keep you in debt for up to seven years and may become a heavy burden if your economic circumstances change for the worse over the life of your loan.

Lenders may impose late fees if you fail to make a timely payment on your loan. But lenders may also honor a car payment grace period before such penalties would apply.

Recommended: Is an Auto Loan Secured or Unsecured?

6 Alternatives to an 84-Month Auto Loan

When you’re looking at auto financing, your choices don’t have to boil down to just a long-term car loan vs. a short-term car loan. There are several other alternative approaches you might consider:

1. Purchase a Less Expensive Car

While a high-maintenance luxury vehicle can be enticing, setting your standards a bit lower could cut down on overall costs. Selecting a less-loaded model in the same line, for instance, might save you a significant amount overall.

2. Choose a Used Car

By picking a used automobile with low mileage, you can still get a reliable vehicle at a more reasonable cost. This can help you avoid taking out an 84-month car loan, and the deal might even come with added perks or warranties.

3. Make a Bigger Down Payment

The more money you can pay upfront when purchasing a car, the less you’ll need to borrow. With a smaller loan, the monthly payments will be less, so you might not have to opt for an 84-month auto loan.

4. Lease a Car Instead

When it comes to the choice between leasing or buying a car, it’s a particularly personal decision. Getting a short-term car lease can mean a lower down payment and lower monthly payments compared with buying a car. That said, leasing also comes with certain fees, restrictions, and penalties for going over on mileage, so it’s not necessarily a best fit for everyone. And of course, when you lease, you don’t own the car.

5. Make Higher Monthly Payments

An 84-month car loan doesn’t necessarily have to take seven years to pay off. You may make higher monthly payments to pay the debt off early. This might be worth considering if your loan doesn’t include prepayment penalties. Making higher monthly payments can minimize your interest charges over the life of your loan.

Prepaying a precomputed interest auto loan, however, may not be as beneficial as prepaying a simple interest auto loan. That’s because any refund you may get from prepaying a precomputed interest car loan is generally lower than what you might have saved if the loan had a simple-interest cost structure.

6. Get a Cosigner

Getting a cosigner who meets the lending requirements may help you qualify for car loans at lower rates of interest. A car loan cosigner is an individual who shares the financial responsibility of repaying the loan alongside the primary borrower, which reduces risk to the lender.

Borrowers and cosigners are expected to provide proof of identity and proof of income when applying for auto loan financing, among other requirements for a car loan.

If you’re drowning in car loan debt, you may wonder if someone can take over your car loan. Transferring an auto loan can be a complex process, but it may be an option for you.

Recommended: No Income Verification Car Loans

The Takeaway

While lower monthly payments may be appealing, taking on an 84-month car loan commitment could mean biting off more than you can financially chew. There are limited instances in which a long-term auto loan is actually worth it. Typically, opting for a standard auto loan can offer more benefits to your financial future, and refinancing can always be an option to consider.

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 banks offer 84-month auto loans?

Yes, some banks may offer 84-month auto loans. A bank is a regulated financial institution with a federal or state-based banking charter to accept deposits from customers. Banks typically offer loans in addition to bank accounts.

What is the downside of financing a car for 84 months?

There can be multiple disadvantages to getting an 84-month car loan. One of the downsides is that borrowers may have difficulty getting above water if they’re carrying an outstanding loan balance greater than the value of the car. Another downside is that borrowers can face steep borrowing costs if the loan charges interest over the life of the loan.

What does 0% financing for 84 months mean?

The meaning of 0% financing for 84 months could mean a lender is offering an 84-month auto loan with the APR set at 0% over the life of the loan. While you are not paying interest, make sure you understand any fees being charged, which can raise the overall cost of the loan.

What is the longest-term car loan available?

Some lenders may offer 180-month car loans as their longest financing option. A 180-month car loan features a 15-year loan repayment schedule. You may consider long-term financing terms of up to 180 months when buying an exotic or classic vehicle.

Photo credit: iStock/Drazen Zigic

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOALR-Q325-089

Buying a car is one of the biggest purchases you may make, and with average prices in the tens of thousands, it’s a financial move that often requires financing or a loan.

Given high auto prices, it’s no surprise that people are borrowing more money than ever for their wheels — Americans have a combined $1.66 trillion in auto debt as of the second quarter of 2025. Indeed, borrowing money to cover the cost of a car is very common.

Whether learning the generalities of what is an auto loan or the specifics of how bank car loans work, there is information that can help, as well as a few options to be aware of when it comes to financing a vehicle.

What Is a Car Loan?

Similar to other types of loans, getting a car loan means borrowing money from a lender, but specifically to cover the cost of buying a car.

There are various options and lenders available when looking for an auto loan, such as financing from dealerships, banks, credit unions, and nonbank financial institutions.

How Auto Loans Work

Car loans function similarly to other types of loans in that the borrower agrees to repay the amount borrowed over time, as outlined in the loan agreement. The amount of money that needs to be repaid includes the principal, interest, and any applicable fees.

One big difference between car loans and other types of loans is that borrowing money for a car almost always involves car loan collateral. While other loans may be either secured or unsecured, car loans typically are secured by the auto itself. In the event that the borrower can’t repay the loan, this leaves the lender with the ability to recoup that money via car repossession.

Auto loans may feature simple interest charges that do not compound. Even so, with the average car loan length coming in just shy of six years, it’s worth noting that the longer the amortization period, the greater the interest charges will be, even if monthly payments are lower with longer loan terms.

Loans with shorter terms under 60 months may feature lower interest on a car loan than loans with longer terms, further increasing potential car loan savings. This is because the longer the auto loan term, the riskier the lender deems it to be.

Recommended: Guide to Car Loan Interest Rates

Key Auto Loan Terms to Know

Here are some common auto loan terms:

•   Annual Percentage Rate: The annual percentage rate, also known as APR, is the interest rate and fees a lender may charge when offering financing. Lenders must disclose the APR in nearly all consumer credit transactions under the Truth in Lending Act, so consumers generally have the ability to compare APRs on car loans.

•   Buyer: The buyer is the primary consumer who purchases the vehicle from a seller. The buyer may sign a buyer’s order when buying a new or used car.

•   Down Payment: A down payment is the amount of money a buyer may pay upfront to reduce total financing costs. One way consumers may avoid upside down auto loans is by making a sizable down payment when buying new or used vehicles.

•   Loan Term: The loan term is the total length of time that a borrower has to repay the debt in full. Auto loan terms are usually measured in months, such as 48 months, 60 months, 84 months, and even 144-month car financing.

•   Seller: The seller is the private person or car dealership selling you the vehicle. A private party auto loan can provide you with financing to buy a used vehicle from a private person selling a car.

•   Vehicle Identification Number: The vehicle identification number, also known as the VIN, is a unique serial number for a car. You may find the VIN on the driver’s side dashboard of a car.

What Types of Lenders Offer Car Loans?

Before a car buyer drives home with their new car, they’ll first have to obtain a loan if they plan to finance the purchase. This is commonly done through the car dealer, a bank, or a private lender. There are pros and cons to each option:

Banks

Qualifying for a bank car loan usually starts with a credit check. As with other types of loans, an individual with a high credit score is more likely to be approved and may pay lower interest because they are considered to be at a lower risk of defaulting than an individual with a low credit score.

Even if someone is concerned they don’t have the credit score needed to buy a car, it’s still worth applying, as a bank may allow a cosigner or offer a loan at a higher APR to account for the added risk. Many people can still get an auto loan with a 650 credit score. However, if someone is concerned about their score, they may want to prequalify for a loan to get an idea of their chances.

A bank will also likely want to see employment and income details, as well as a government-issued ID and proof of address. Some banks will also require information about the car the borrower wants to purchase.

Dealerships

A car dealer has a vested interest in the car purchase. After all, if the prospective buyer needs financing but is unable to get a car loan, the dealer won’t make the sale and won’t get paid. Documents required to qualify for dealer financing are generally the same as those required for bank financing: proof of employment, income, and residence. Vehicle information will, of course, already be known.

There are situations where this may work in the car buyer’s favor. For example, if the dealer has been falling short of sales quotas, they may be inclined to reduce interest rates or offer low or 0% interest financing to incentivize buyers.

Given that the average APR for a 60-month new car loan at commercial banks was 7.67% in the second quarter of 2025, the savings associated with such a promotion can be substantial. For a 60-month car loan to pay for an average-priced new car — $48,699 — the total paid over the term of the loan would be $58,786, including $10,087 in interest based on the average APR (not including any additional fees or taxes or accounting for a down payment).

Dealers may also offer greater financing flexibility, which can be a double-edged sword. They may be more likely to extend a loan to someone whose credit score would disqualify them at the bank and might encourage a longer loan term to make monthly payments more affordable. Keep in mind that this may increase the risk of default for some individuals.

Private Lenders

Some car buyers might not want to use bank or dealer financing, but still need some sort of loan to buy a car. Financing through a private lender can be another option to consider.

A private lender might be a friend or family member. If that’s not an option, peer-to-peer lending might be something to look into. P2P lending matches two individuals — one that has money to lend and one that needs a loan.

People who might not have the creditworthiness to qualify for a loan from a bank or dealership might be able to qualify for a P2P loan, as they sometimes have more flexible qualification requirements. Shorter credit histories or credit scores that are just “fair” might qualify for a P2P loan, whereas those might be cause for denial of a traditional auto loan.

Recommended: Grace Period for Car Payments

GAP Insurance Need to Knows

Guaranteed asset protection, also known as GAP insurance, is an optional coverage that car drivers may purchase. If you’ve taken out an auto loan, GAP insurance may benefit you in the event that your vehicle gets totaled or stolen.

Standard auto insurance, including comprehensive coverage, may only insure the actual cash value of a damaged or stolen vehicle. This means the outstanding balance of your car loan may not be covered by your standard car insurance policy.

GAP insurance, meanwhile, can help ensure that you won’t have to continue paying a monthly car payment on a destroyed or stolen vehicle. GAP insurance can fill the gap in situations where comprehensive coverage may fall short.

Personal Loans vs Auto Loans

Borrowers may use personal loans for almost any household purpose, while auto loans are restricted to financing the purchase of a motor vehicle. The below table compares personal loans vs. auto loans:

Different Types of Auto Loans

Below we highlight several different auto loans:

Secured vs Unsecured Auto Loans

The difference between secured vs. unsecured auto loans is that the vehicle serves as collateral on the secured loan, whereas borrowers pledge no assets as collateral on an unsecured car loan.

Lenders may seize the vehicle if a borrower defaults on the secured auto loan, which means secured auto loans present more risk to the borrower.

Unsecured auto loans present more risk to the lender. The interest rate you get on an unsecured auto loan, therefore, may be higher than the interest rate you might get with secured auto loans.

You may need good credit to qualify for an unsecured auto loan, and lenders may sue you for breach of contract if you fail to make required payments on the loan.

Simple vs Precomputed Interest Car Loans

A simple interest auto loan is a car loan that charges simple interest on the outstanding balance of your loan each month, while a precomputed interest car loan is a loan that calculates the finance charges up front and adds that to your principal loan balance from the outset.

Simple interest loans may include a fixed APR, and monthly payments on the loan go toward interest charges and repaying the principal loan amount. Paying simple interest on the outstanding balance of your loan means the amount of interest you owe will decrease as you pay down the principal.

With precomputed interest loans, the combined sum of your interest charges, principal loan amount, and any other finance charges represents your starting account balance. The lender would divide your starting account balance by the length of your term to calculate your monthly payment on the loan.

You may be entitled to a refund if you pay off the precomputed interest car loan early. Prepaying a precomputed interest auto loan, however, is generally not as beneficial as prepaying a simple interest auto loan. That’s because any refund you get from prepaying a precomputed interest loan is generally lower than what you might have saved if the loan had a simple interest cost structure.

Preapproved Auto Loans

Preapproved auto loans are a possible financing package you may get before visiting a dealership to buy a car. Banks, credit unions, and private lenders may offer these loans to creditworthy consumers.

Getting a lender’s preapproval means the lender tells you how much financing it is willing to offer you and the proposed terms and conditions. A preapproved auto loan is conditional and not necessarily a guarantee of financing, but some lenders may give you a check equal to your preapproved amount.

Going to a dealership with a preapproved auto loan means you don’t have to rely on the dealer for financing. A lender, however, may cancel your preapproved loan offer if you fail to meet its underwriting and qualification standards on the date of sale.

Recommended: Preapproval vs Prequalify: What’s the Difference?

Other Special Loan Types

Other special loan types can include subprime auto loans for borrowers with bad credit scores below 600. Deep subprime borrowers had an average auto loan rate of 15.81% on new vehicle financing and 21.58% on used vehicle financing in Q1 2025. The average rate is generally much lower for borrowers with good credit scores above 660.

Here’s additional loan types for car financing or refinancing:

•  No income verification car loans

•  Military refinance auto loan

•  0% APR financing from captive finance companies affiliated with auto manufacturers

What Happens if an Auto Loan Is Not Paid Back?

Defaulting on any type of loan can negatively affect your credit score. Defaulting on a secured auto loan (or any secured loan, for that matter) means the lender can also initiate car repossession because the car was used as collateral.

Talking to your lender when you realize you’re going to have trouble making your auto loan payments is a good first step to take. Some lenders might have debt relief options, such as skipping a few payments or refinancing the loan, for example.

Some lenders might allow someone else to take over the payments on your loan. Having someone assume your loan typically requires similar documentation from that person as the original borrower provided when initially applying for the loan. The lender will want to make sure the new borrower will be able to make the payments.

Car Loan Requirements

Borrowers are generally expected to provide proof of identity and proof of income when applying for auto loan financing, among other requirements for a car loan.

You may present a passport, driver’s license, or other documentation issued by a government agency as proof of identity.

Pay stubs, bank statements, and W-2 tax forms may serve as proof of income. You may need the help of a car loan cosigner to qualify for a car loan with no proof of income.

Can Someone Take Over a Car Loan if Someone Dies?

What happens to a car loan when the borrower dies? The answer is that car loans do not simply disappear when a borrower dies. A surviving spouse may be responsible for paying the debt, or a lender may move to repossess the vehicle. This shows it’s possible for a third party to take over a car loan if and when the main borrower dies.

Taking over another person’s car loan doesn’t necessarily require a borrower’s death. If you’re drowning in car loan debt, you may wonder, “Can someone take over my car loan?” Transferring an auto loan can be a complex process, but it may be an option for you.

Car Loan Alternatives

Taking out a large loan to purchase a new car is not the only way to obtain a form of transportation. There are options to consider, such as:

•  Saving up to buy the car with cash

•  Save up a larger down payment so the amount financed is less

•  Buying an affordable used car rather than a new car

•  Leasing a car instead of buying a car

•  Using home equity to finance a car

•  Get a personal loan

Finding ways to make a car more affordable, regardless of financing, might be negotiating the price of the car, negotiating the trade-in value of the car you’re replacing (if that applies), or determining if any offered add-ons (such as extended warranty or service contract) are really worth the extra cost. Know what you are able to afford and don’t be afraid to walk away from a salesperson if you can’t come to an agreement.

Recommended: Should I Buy a New or Used Car?

The Takeaway

Whether you plan to use a car for weekends away and shopping trips or it’s a must for your daily commute, it’s likely to be a costly purchase. If a vehicle purchase is necessary, finding the best car for your circumstances at a cost you can afford is an important part of your financial plan.

If you already have a car but are looking to lower your payment, consider auto loan refinancing. When you refinance your car, you pay off the existing loan with a new loan, ideally with a better rate and terms.

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

Is getting a car loan in general a good idea?

It may be a good idea for you to get a car loan if you need a new or used vehicle and financing to buy one. Some consumers may qualify for 0% APR on a car loan. Getting a car loan can also help you build up your credit history, which can be important if you need to borrow additional money in the future.

Is it better to get car loans or bank loans?

If you need financing to buy a car, it might be better for you to get a car loan rather than a personal bank loan. The interest rate you get on a car loan may be lower than the interest rate you get on a personal bank loan.

Does a car loan amount include the down payment?

No, a car loan amount doesn’t include your down payment. The purpose of a down payment is to reduce the amount of money you need to borrow when financing a motor vehicle purchase. Putting money down gives you an equity stake in the vehicle before paying your first monthly payment on the loan.

Do car loans go directly into your bank account?

No, car loans typically do not go directly into your bank account. Instead, lenders usually send the funds directly to the car dealer or seller. For private party purchases, some lenders may issue a check or electronic transfer to the seller, ensuring the loan is used specifically for the vehicle purchase.

Photo credit: iStock/anyaberkut

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-Q325-088

The average motorcycle costs between $5,000 and $15,000, and for a high-end bike, you could end up paying as much as $30,000 or more.

It’s common to take out a motorcycle loan to cover such a large purchase. And down the line, if monthly payments become unmanageable or you think you may be able to secure a lower interest rate, it may be possible to refinance the motorcycle loan.

Keep reading to learn how to refinance a motorcycle loan, including how long it takes and whether or not it’s worth it.

Can You Refinance a Motorcycle?

Refinancing an auto loan or home mortgage is likely a familiar concept to you. When you refinance any loan, including a motorcycle loan, you take out a new loan — preferably one with lower interest rates or more manageable terms — and use it to pay off your old loan. You then begin to make monthly payments on your new, refinanced loan.

Not all lenders who refinance auto loans necessarily refinance motorcycles, so it’s important to do your homework when pursuing this kind of financing.

Steps for Refinancing a Motorcycle

If you’re interested in refinancing a motorcycle, follow these steps:

1. Determine the Remaining Balance of Your Motorcycle Loan

Your first step is to figure out how much money you still owe on your original motorcycle loan. This amount will give you an idea of how large your refinance loan will be. The easiest way to find your balance may be by contacting your lender directly. You may also be able to find the amount on recent loan statements. Once you know how much you need to borrow, you can start comparing lenders.

2. Compare Lenders

Terms and interest rates will vary by lender, so it pays to shop around for a few different options among lenders who refinance used motorcycles. What’s more, lenders will also have different requirements for factors such as credit score. In general, the higher your credit score, the more likely you will be able to secure a loan with favorable terms and interest rates. The lower your score, the harder it may be to secure a loan.

If you have poor credit, it may still be possible to find a lender that will offer you a loan. However, the loan may come with contingencies, such as high interest rates, to help compensate for the risk they assume by offering you a loan.

3. Determine Requirements to Refinance a Motorcycle

You may need additional documents and information to further the loan process along. Gather these ahead of time to speed the process and save potential headaches. You’ll need your vehicle identification number (VIN), along with the make and model of your bike. You may also need your bike’s insurance information, recent tax returns, employer information, and in some cases you may need documentation of your motorcycle’s value.

4. Apply to Refinance a Motorcycle

With documentation in hand, you can begin to apply to refinance your vehicle loan. You may want to apply to a few different lenders to see what terms and interest rates you’re offered. Consider local options, including credit unions, as well as national lenders.

Applying for a loan will likely have a slight negative impact on your credit score. That said, applying for multiple loans doesn’t hurt your score any more than applying for just one loan as long as you do so within a 14-day period. The major credit-reporting bureaus — TransUnion®, Equifax®, and Experian® — allow this window so consumers aren’t penalized for shopping around for the best loan.

5. Negotiate Terms and Rates

It never hurts to advocate for yourself. Armed with research on what various lenders are willing to offer, you can approach a bank, credit union, or online lender and negotiate terms and interest rates on a refinanced loan. Borrowers with higher credit scores will likely be in the best position to negotiate.

6. Payoff Remaining Motorcycle Loan Balance

Once you’re approved for a refinance loan, you’ll pay off the remaining balance on your old loan and begin the process of paying off your new loan.

One thing to be aware of is the possibility of prepayment penalties. Lenders make money on loans by charging interest. When you pay off a loan early, you’re no longer making those interest payments. To make up for this lost revenue, lenders may charge fees when you pay off your loan ahead of schedule. Check the fine print on your loan agreement to see if prepayment penalties apply and, if so, whether they negate the positive effects of refinancing your loan in the first place.

Recommended: Determining the Value of a Motorcyle

Is Refinancing a Motorcycle a Long Process?

Refinancing a motorcycle isn’t typically a long process, often taking a few days to a couple of weeks. The timeline depends on lender requirements, document submission, and credit evaluation. Quick approvals are possible if all paperwork is in order and the applicant meets the lender’s refinancing criteria.

When Is Refinancing a Motorcycle Worth It?

You may consider refinancing a motorcycle loan for two reasons. First, if interest rates have dropped or you’ve built your credit score, you may be able to secure a new loan with lower interest rates. This will save you money in the long run.

In some cases, you may want to lower your monthly payments. One strategy for doing so is extending your term with a refinance. Note that when you extend your terms, your monthly payments may become more manageable, however, you will be paying interest for longer. This may make this option more expensive in the long run.

Conversely, if you can afford a higher payment, shortening your term may mean a more expensive monthly bill, but you’ll pay less in interest, ultimately resulting in savings over time.

Be sure you understand the costs and fees associated with a refinance, such as prepayment penalties and origination fees. If they outweigh potential savings, the refinancing process may not be worth it.

The Takeaway

When refinancing a motorcycle, as with an auto loan refinance, it’s important to do your due diligence and shop around for the lender that will provide the best fit for your situation. Choosing the best terms and interest rate can ultimately save you a lot of money in the future.

If a motorcycle isn’t the only thing you’re looking to refinance, check out auto loan refinancing options.

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 do you refinance a used motorcycle?

The refinancing process for a loan on a used motorcycle is the same as the process for a new bike. Shop around to several lenders for the best terms and interest rates, and follow their application process.

How long does refinancing a motorcycle take?

Refinancing a motorcycle typically takes between a few days to a couple of weeks. The exact timeframe depends on factors such as your financial situation, the lender’s processes, and how quickly you can provide the necessary documentation.

What credit score do you need to refinance a motorcycle?

Each lender will have different credit score requirements. The higher your score, the more likely you are to secure preferential terms and interest rates. You may still qualify for a loan refinance with a poor credit score, however, you may be charged a higher interest rate.

Photo credit: iStock/EyeEm Mobile GmbH

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-Q325-087

Breaking a car lease early can be a challenging and potentially costly decision, but it may be necessary due to financial changes, lifestyle adjustments, or dissatisfaction with the vehicle.

Car leases are legally binding contracts, and ending them ahead of schedule often involves fees and penalties. However, understanding your lease agreement and exploring available options can help you minimize the financial burden while addressing your needs.

Keep reading to learn more on getting out of car leases early, pros and cons of ending a lease early, and whether or not it’s the right decision for you.

Is it Possible to Get Out of Car Leases Early?

Yes, it’s possible to get out of car leases early. But as mentioned above, ending the lease before its scheduled termination date can be costly.

If you want to get rid of car lease obligations and pay off your car lease early, be prepared to pay thousands of dollars in early termination charges. That’s because the appraised value of the vehicle typically depreciates more quickly at the beginning of the lease.

The way car leasing works is the leasing company sets certain terms and conditions in which you agree to pay a monthly charge for the privilege to drive the vehicle. The contract may give you the option to terminate your lease early.

Here are some car leasing basics:

•  Short-term leases can be anywhere from 12 to 24 months, while a long-term lease can be up to 60 months.

•  Leasing companies may charge fees for lease acquisition when approving your auto lease contract.

•  When negotiating a car lease, you may negotiate for lower rent charges, and you may negotiate early termination charges once your lease goes into effect.

•  You may terminate a car lease early, or you may request a lease extension.

4 Ways of Getting Out of a Car Lease Early

Ending a car lease early is typically accomplished by going one of the following routes:

•  Early termination of a car lease

•  Lease buyout

•  Lease transfers

•  Buying another car

Here’s more about each method for getting out of car lease early:

1. Early Termination of a Car Lease

Early termination is a straightforward way of getting out of car leases early and returning the vehicle.

To see what this might involve, review your lease agreement to see what termination fees are listed and what else you might be required to pay to get out of the lease. The termination fee can range from about $300 to more than $1,000, and there may also be lease disposition costs, any fees charged for excessive wear and tear, fees for going over the mileage listed in the agreement, and so forth. Plus, you also need to consider how many of the remaining monthly payments you would be responsible for making.

If you’re interested in getting out of an auto lease through this method, contact your leasing company for the actual figures and then decide if it’s worth following through.

Recommended: Car Lease Acquisition Fee

2. Lease Buyout

With a lease buyout, you purchase the leased vehicle outright. Although this is often done at the end of a lease, most leasing agreements will allow you to buy the vehicle before the lease expires.

Look at the leasing agreement for the residual value, which is the amount the leasing company estimated that the car would be worth at the end of the lease. Then verify that you can purchase the car before the term ends. You will probably have to pay the residual value plus any remaining lease payments, as well as sales tax.

Early termination fees may also apply, but a lease buyout gives you the advantages of ownership, including equity, the right to make modifications, and no mileage limits. However, you won’t have any free servicing from the dealer and your payments may be larger.

Lease Buying Out Funding Options

If you’re paying off the vehicle and the associated fees in cash, then you simply verify the amount and pay off the lease.

Need financing? Just like you would for any other type of vehicle loan, shop around. The leasing company may offer you financing but its rates and annual percentage rates (APRs) may not be the best, and there aren’t extra fees if you go with your own financial institution of choice.

The lease buyout loan will be structured like a refinancing loan where you borrow money to pay off the current amount owed and then make payments to your new lender. You can get offers for auto refinancing quickly and easily online.

Recommended: Understanding Auto Loan Settlements

3. Transfer Leases

In many cases, you can secure an early termination of a car lease by transferring it to someone else. This may be the least expensive option. If you want to get out of your auto lease early by transferring the lease, check with the leasing company to make sure it allows this.

If it does, consider whether the new lessee (the person who will hold the lease) will take on full liability. In other words, if they don’t make the payments, are you liable to make them? If you are, you could be stuck with making the overdue/missed payments while not having the vehicle to drive.

If you don’t already know someone who wants to take over the payments during the remaining term of the lease, there are websites that match up lessees with people who are interested in taking one over, such as Swapalease and LeaseTrader. These websites usually charge $100 to $350 for their services, and the leasing company may charge a transfer fee, often around $300.

Lessees wanting to terminate their lease early can add up these fees to decide if getting out of car leases is still an attractive option. Some people who want to get out of their lease might decide to offer a financial incentive to get someone else to take it over for them. If you do that, factor in that dollar amount, as well, when deciding if the transaction is worth it to you.

Recommended: Can You Extend a Lease on a Car?

4. Buy or Lease Another Car

To exercise this option, you’d take the vehicle to a dealership to see how much money it would pay for it. (While you don’t own the vehicle, in this scenario you’re essentially trying to arrange a sale from the leasing company to the dealership.) If the amount the dealership offers is greater than the residual value of the car (specified in your contract) plus the amount you owe on the lease, you could use that difference to put toward purchasing or leasing another vehicle.

When you owe more than the dealer would pay for the vehicle, some lenders will combine what’s still owed on the leased vehicle with the loan for the one you’re buying or leasing.

Payments will be higher with this merged loan and it’s likely that you’d be “upside down” on it, which means you’d owe more on the loan than your newly purchased vehicle would be worth, and is typically financially precarious.

Going this route involves two key decisions. The first is whether to end your current lease early, and the second is whether to buy (rather than lease) your next vehicle.

Recommended: Guide to Finance Charges on Car Loans

Pros and Cons of Ending Car Leases Early

Ending a car lease early can offer flexibility in situations where your financial or personal needs change, but it often comes with significant costs and potential penalties. Understanding the pros and cons of early lease termination can help you make an informed decision that aligns with your circumstances and goals.

Is Getting Out of a Car Lease Early Right for You?

Getting out of car leases early may be right for you if you can afford the transaction. As mentioned earlier, terminating your car lease early can cost thousands of dollars. Your personal circumstances may dictate whether getting out of a car lease early is right for you.

One of the downsides to leasing a car is that you’ll pay monthly rent charges in exchange for no ownership equity stake. A typical car lease also imposes annual mileage limits. Freeing yourself from the confines of a car lease early can therefore be liberating.

Recommended: What Is the Average Credit Score to Buy a Car?

The Takeaway

There are several ways you may be able to end a car lease early. These include paying to terminate the lease early, a lease buyout, a lease transfer, or arranging the sale of the car to purchase or lease another car. Weigh the advantages and disadvantages of each approach and then choose the one that makes the most sense for your situation.

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’s the best way to get out a car lease?

The best way to get out of a car lease depends on your situation. Options include transferring the lease to someone else, negotiating a lease buyout, or trading in the vehicle. Lease transfers often minimize costs, while buyouts provide ownership. Always review lease terms to choose the most cost-effective option.

Can you negotiate a car lease buyout early?

Yes, you can negotiate a car lease buyout early. You may contact your leasing company and request a lease buyout before your leasing contract expires. Your leasing contract may permit early termination, and you may negotiate car lease buyout terms that are right for you. Getting out of car lease early is possible, and leasing companies may be open to negotiations.

How much is the early termination fee for a car lease?

The early termination fee for a car lease varies depending on the leasing agreement. It typically includes remaining payments, depreciation costs, and additional penalties. On average, fees can range from a few hundred to thousands of dollars. Always review your lease terms to understand the exact early termination costs.

Photo credit: iStock/Jinda Noipho

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOALR-Q325-086