My Experience Refinancing my Auto Loan

A few months ago we bought a car, and although we got pre-approved financing with our local credit union, we ended up using a different bank when the finance guys at the dealership were able to get us a 0.2% better rate.

Not much, but why not go with the better rate?

Fast forward two or three months and I start seeing the following banner when I log into my credit union account:

WPCU Refi Your Ride Banner

Yep - my local credit union was (and is, until October 31st) having a Refi Your Ride event where someone will get a 1% rebate on the amount refinanced.

Refinance a $30,000 auto loan, earn $300.

Refinance a $50,000 auto loan, earn $500.

Refinance a $75,000 auto loan, earn $500… Okay, so the most one can “earn” is $500. There are always limits, right?

Some Mental Math

Remembering that I had previously been offered a right 0.2% higher than I’m paying now, I did some quick mental math to see if the Refi would be worth it (this is on a 5-year loan):

0.002*5x is less than, greater than, or equal to 0.01x
0.01x is less than, greater than, or equal to 0.01x
0.01 = 0.01

Above x is equal to loan balance - I use a variable to illustrate that the amount of the loan is irrelevant to whether I will “save” money. The number on the left is how much I would pay using simple interest, which means I would actually pay less than the computed value. The number on the right is the amount of the rebate.

This gives me a rough idea that I would pay less in interest than the amount of the rebate, no matter the balance on the loan.

The Process

The process was rather simple.

After work on Tuesday, October 8th, 2019, I gathered up what documents I could find from the lending bank - I printed out my last statement and a payoff quote - and headed to the credit union with my wife.

It was less than an hour before the branch closed, which worked in my favor since it seemed the person processing my application was ready to go home - that person quickly and efficiently processed my application and didn’t try to upsell me anything.

To my amazement, they were able to offer me a refinance at 0.2% lower than I was paying the current lending bank. All my mental math had gone to waste!

(I guess falling interest rates have helped me out, then?)

There was one “gotcha” or “hidden fee” - a $30 title transfer fee. Not really hidden because they told me about it upfront, but I don’t see it anywhere on their promotional material.

Oh, and I couldn’t finalize the loan since I didn’t bring the memorandum of title with me.

I brought it to the branch the next day - once again, after work - but this time I didn’t bring my wife with me.

A different person finished my application, and I had to say “no” to things such as gap insurance and extended warranty. At least they didn’t push it.

Over a week later - Friday, October 18th, 2019 - the other bank finally showed that the loan balance was $0.00. They did show that the transaction that paid the loan happened on the day before - October 17th.

Basically, that means I had a week where I was paying double interest on the loan - a week of interest to the original lender, and a week of interest to my credit union.

Still worth it. And my payment is a buck or two less a month.

What About the Rebate?

I got the rebate the same time I finalized the loan details. I even got a deposit slip showing the money was deposited into my checking account!

That money went straight towards debt. I do the debt avalanche - so it went to the highest interest debt.

Would You?

WPCU Refi Your Ride Banner

Would you take advantage of a 1% rebate when you refinance an auto loan?