Don’t Buy a New Car Just Yet! 2020 Might be the Best Year to Refinance Your Car Loan

Thinking about buying a new car? It may be smarter to refinance the auto loan on your current vehicle instead. Credit scores are higher, there are inventory shortages and there’s surging demand for vehicles.

All-Time High Scores

It sounds counterintuitive during a time when, as a result of Covid-19, businesses were shut down and millions of people became unemployed, but the The Wall Street Journal reported in October  the average credit score in the United States is now at an all-time high of 711. This puts the average American consumer solidly in the middle of the “Prime” credit range, which Experian defines as 661 – 780.

It’s notable that during a time of increased un- and under-employment, the most widely-used measure of credit risk indicates that consumers are, on average, more worthy of borrowing than they were before the pandemic.  The article attributes this record-high average score to a combination of forces, notably federal stimulus checks (still available if you apply by November 21) and more conservative consumer spending.  Time will tell how well this phenomenon predicts future repayment behavior. 

Constrained New Vehicle Supply and Elevated Demand Will Push Prices Up

Another trend the WSJ highlighted in an article on October 26, 2020 is the car industry’s struggle to keep up with demand for vehicles.  Covid has disrupted worldwide supply chains and vehicle production remains affected, regardless of manufacturing country.  This coincides with boosted demand for vehicles from an increasing number of Americans who, seeking a safe and socially-distanced commuting option, are buying cars for the first time in decades.  Economics 101 tells us that reduced supply and increased demand inevitably lead to higher prices.

Most of today’s cars are more durable and well-made than before, and they are lasting longer.  If you are enjoying a higher credit score and repaying a current car loan, consider holding off on any new car purchase in the coming months.  Avoid paying an elevated price, and consider taking advantage of this moment by refinancing your current car loan. 

Begin your refinance journey by finding out your Loan-to-Value (LTV) ratio, which is the amount you owe divided by how much your car is worth.  If this ratio calculates to under 120%, you can likely secure a lower payment by refinancing.  It’s easier than you think.  Stop by to get started.Has your credit score gone up?  You can find out quickly for free in several places, but here are three good ones:, (this one requires a $1.00 refundable deposit, but you see your score from all three bureaus),

By Casey Harmon

Casey Harmon is the Co-Founder and CEO of Pacecar Inc. Before founding Pacecar, Casey held various executive positions at Westlake Financial and Toyota Financial Services. He has an MBA from UCLA Anderson and a BA from Stanford. Casey believes all American car drivers should have access to the best loan terms available. Casey lives in the Los Angeles area with his wife and two children.

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