How Soon Can You Refinance A Car Loan After Purchase?

How Soon Can You Refinance A Car Loan After Purchase?

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated August 5, 2022

Refinancing a loan means cancelling your current payment plan and getting a cheaper one with a longer term. Borrowers will sometimes do this because they’re unhappy with their financial institution or the interest rates they charge. Refinancing is particularly common with larger, more expensive loans like mortgages and, in this case, car loans.  

Before you try to refinance a car loan, don’t hesitate to ask your lender or auto dealer some questions. For instance, how soon can you refinance a car loan after purchase?

Can You Refinance Your Car Loan?

If you’ve already got a car loan and your finances are in good shape, chances are you can get a refinancing deal. Just make sure to read your loan’s conditions beforehand. For example, your current lender could charge a prepayment penalty if you pay off your car loan early. Other fees and interest may also come up during the title transfer process.  

Plus, refinancing isn’t the best plan when the prepayment penalties cost more than the amount you would be saving by refinancing your car loan, so ask your lender about their loan conditions. Luckily, some lenders don’t charge for early payments. You may also be able to bypass those sorts of penalties by waiting a bit longer to refinance your car loan.   

Want To Lower Your Car Payments?

Speak with a Loans Canada representative today and learn how you can refinance your car loan and save. Call us today at 1-877-995-6269 or click here.

Note: Program is currently not offered in Quebec.

How Soon Can You Refinance A Car Loan After Purchase?

The answer depends on your new lender’s policies (if you’re switching), as well as the conditions of your new loan contract. Lenders might let you refinance a car loan after a few weeks or months. Then again, some lenders won’t allow you to refinance, unless you pay a huge penalty fee. 

It can also take time for the lender to process your application and draw up a new plan for you. So, if you’re not totally confident about the refinancing process or how long it takes, it could be safer to wait until you’ve made your first car loan payment. This way, you can at least prevent yourself from missing payments or harming your credit score.    

Can You Refinance A Car Loan After 3 Months? 

Generally, most lenders won’t consider your refinancing application until your vehicle’s title has been transferred to them from the previous owner, lender or manufacturer. That process alone can take about 2 or 3 months. So, in the meantime, you might want to compare rates and pre-qualify with other lenders to see if you can find a better deal. 

Keep in mind that your credit score may have also dropped slightly after you applied for your previous car loan. Since a lower credit score can lead to higher interest rates, it’s a good idea to use that extra time and improve yours (unless you still have great credit).       

Can You Refinance a Car Loan After 6 Months?

If you’ve experienced debt problems in the past or you’re new to vehicle financing, it may be smart to wait at least 6 months to a year until you try to refinance your car loan. This will give you plenty of time to build a solid credit score and credit history, as most lenders like to see 6 – 12 months of responsible payments before approving a borrower.

However, if your credit, income and debt levels are currently strong enough to qualify for a decent loan and a lower interest rate than your previous lender was charging, 6 months should be enough time to wait until you apply to refinance your car loan.     

Can You Refinance A Car Loan After 2 Years?

Prior to refinancing your car loan, it’s also important to ask your lender about their requirements, which can become relevant later in your payment term. Some lenders impose specific limits when it comes to the age, mileage and general condition of your vehicle, as well as the time and balance remaining on your current payment term.

You may not save as much money if you wait more than 2 years into your loan term to refinance, as you could have paid off most of the interest on it by this point. Your new lender might not benefit from the transaction by letting you refinance beyond that point. 

Where Can You Refinance Your Car Loan? 

AmountInterest Term(Months)
Loans Canada Logo - Bad Credit Loans Canada$500 - $50,000Up to 46.96%12 - 84Learn More
Canada Drives$500 - $35,000$29.99% – 46.96%9 - 60Learn more
SkyCap Financial$500 – $10,00012.99% – 39.99%9 - 36Learn more
Carloans411$5,000 - $40,000Varies12 - 72Learn more
Car Loans Canada$7500 - $59,9953.95% +12 -96Learn more
Canada Auto Finance$5,000 - $45,0004.90 % - 29.95%36 - 72Learn more
Eden ParkVaries11.9% +12 - 84Learn more
Splash Auto Finance by RifcoUp to $50,000Varies12 - 84Learn more
SafeLendUp to $50,0008.99% +12 - 72Learn more

How To Refinance Your Car Loan After Purchase?

Although the full process can take some time, refinancing your car loan is pretty simple. To complete your paperwork, you just have to enter all the same information as you did on your previous car loan application, along with the details of your current vehicle. 

Documents Required To Refinance Car Loan After Purchase

Documents that are normally required to apply for car loan refinancing in Canada:

  • Government photo identification, like your driver’s license or passport
  • Your tax return information or a recent pay stub from your source of employment
  • Your banking details or a VOID cheque for a pre-authorized payment agreement
  • Essential information about your car (make, model, trim, title, year, etc.). 

Should You Refinance Your Car Loan?

Before deciding to refinance a car loan, there are a few things you should consider. Your new payment term and interest rate could drastically affect the overall cost of your car loan, so be sure to take your time and do your research when making your decision.

In fact, it’s probably only a good idea to refinance your car loan when: 

  • You Meet the Lender’s Approval Requirements – Since it can lead to a hard inquiry on your credit report and a drop in your credit score, it’s better to wait until you have all the proper criteria and documents to apply for car loan refinancing.  
  • You Have Good Credit and Finances – If you want to qualify for a low-interest rate and favourable car loan term, you shouldn’t apply for refinancing until your income and credit score are in great shape. This includes having a decent job.   
  • Your New Interest Rate Would Be Worth The Trouble – If you’re not able to score a lower interest rate, smaller payments or a cheaper payment plan out of the deal, refinancing a car loan probably isn’t the wisest choice.   

Reasons You Should NOT Refinance Your Car Loan

Refinancing a car loan is a serious financial commitment that shouldn’t be taken lightly. There are some major reasons to avoid refinancing a car loan after purchase, such as: 

  • Having Late Payments If you’re not up to date on your current car payments, it’s not smart to apply for refinancing. The lender may not even approve you if they think you could default. The same idea goes for your other unpaid debts.  
  • Getting A Higher Rate Or More Expensive Loan – Refinancing doesn’t really make sense unless you’re getting a cheaper deal out of it. If your new car loan would just cost more than your car’s value, refinancing isn’t worth the trouble.  
  • Having Other Large Costs – Remember, refinancing a car loan can lead to more debt and a hard inquiry on your credit report. So, if you applied for a mortgage or other large loan at the same time, the lender may see those things and deny you.   

Refinancing FAQs

How soon can you refinance a car loan with bad credit?

If you have a decent income, some lenders will approve you for car loan refinancing with bad credit. However, bad credit can lead to higher rates and worse conditions for your new car loan, so it might be a better idea to wait until you’ve improved your credit.   

Can you refinance a car loan immediately?

It depends on where you got your car loan and what its conditions are. Some lenders will approve you right away if your finances and credit are in great shape, others won’t until at least a few weeks have passed and your car’s title has been transferred over.   

Does refinancing a car loan hurt your credit?

Yes! As with any credit product, applying for refinancing will lead to hard inquiry on your credit report which may cause a drop in your credit scores. However, this impact is usually temporary and can rebound after you make several timely payments on your car loan and/or other ongoing debts. 

How many times can you refinance a car?

Technically, as long as you find a lender that approves your applications, there’s no legal limit on the number of times you can refinance a car loan. That said, every lender has different conditions and some will deny applicants who’ve refinanced multiple times.    

How long can you wait before refinancing?

In general, there’s no minimum or maximum time you can wait before refinancing your car. However, waiting too long to refinance your loan can be a mistake, especially if you’re refinancing an older car with less value. Used car loan rates are often higher than new car rates, and some dealers may not be willing to offer you refinancing if your car is too old. 

Bottom Line

If you’ve decided to refinance a car loan after purchase, don’t forget to compare lenders and interest rates beforehand. After all, refinancing can only save you hundreds, maybe even thousands of dollars if you get a good deal. For more details about refinancing and car loans in your region, check out the Loans Canada website.       


Rating of 5/5 based on 1 vote.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.

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