Wednesday, 20 June 2012
Car Refinance - Which Cars Cannot Be Refinanced?
A car is a heaven on wheels.
It is the ultimate American dream. And to make it a reality, you obviously need to avail an auto loan. But are car loans really affordable?
It is for this reason that car refinancing has become a lucrative option. But, you must know that car refinancing is not for everyone. The economy has suffered the worst crisis and everyone is affected by it. Lenders have become more cautious and they consider a few selected cars unworthy for lending.
WHAT KIND OF CAR WON'T BE REFINANCED BY A LENDER?
An Old Beauty
When you refinance your car, you must remember that the rules of real-estate refinancing don't apply. Unlike your home, your car's value depreciates every single day. So, a very old car is generally rejected by lenders.
Another aspect is LTV. The Loan to Value ratio is a depiction of how much you owe vs. your car's current value. Lenders understand that being a depreciating asset, a car's LTV will be higher than 100%. But a very old car will have an exponentially high LTV value. This means there are higher chances of an up-side down loan. So, lenders stay away from cars older than 7 years.
When your vehicle is damaged to the extent that is deemed as a "total loss" by your insurance company, it is given a salvage title. Each State has different criteria for considering a car as salvage or junk.
Mostly if your car sustains damages worth 75% or more, it is given a salvage title. But each State has its own rules. E.g. Florida considers a car as junk if the car damages are worth 80%. Several States also use the salvage title to identify stolen cars.
If your vehicle has a salvage title, its market value will be very low. This will increase the LTV ratio. Lenders usually stay away from refinancing such cars because of the higher risk involved.
To refinance, your vehicle must have a clean title. Now, the title will obviously have lien against it, as you are still to pay off your old loan. But by no means, the car should be severely damaged, stolen or repossessed. It is also important that the odometer shouldn't be rolled back.
Have you altered your car to enhance its performance? Have you worked on its engine? Have you customized it according to your style?
Well, it means you have modified your car. Such cars fetch less value in the market.
The reason - Would you like to buy a car that doesn't go with your style? The answer is in negation, isn't it?
Everyone has a personal choice and no one will want to ride in a car stylized by someone else. So, lenders are clearly less interested in a customized car.
If a car is used for business purpose, it's obviously driven for longer distances and is constantly being used for heaving heavy equipments. More use causes rapid depreciation in a car's value. This means the car won't be useful as collateral.
In this scenario, you cannot really blame the lenders for not refinancing you.
So, these are few of the car types which face problem in the refinancing market. But it is important to understand that nothing is black and white. A lender may be impressed by your income and financial stability and decide to refinance a car. Another lender may decide to refinance your car even if it is eight years old and someone will reject even a four year old car.
So, I would like to tell you that never lose hope or get discouraged. All you need to do is search for a lender who will accept your application. And the best way to do it is by using the web.
Don't wait anymore; get a low rate car loan at the earliest. Emancipate yourself from an agonizing loan today!