Do I Have to Let My Dealership Know I'm Refinancing?

If you want to refinance a car that you originally bought through a dealer, you may be wondering how the process works. For example, can a dealership stop you from refinancing a car, and do you have to notify them? In most cases, all you need to focus on is getting approved for a better deal — your new lender typically handles the rest. But there are a few exceptions. Here’s what you should know. 

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Refinancing and how it works

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Refinancing an auto loan involves replacing your current loan with a new and improved one. The process starts with reviewing your current loan details, including your outstanding balance, interest rate, remaining overall cost and monthly payment amount. Additionally, it’s important to check your contract to see if your lender charges a prepayment penalty or has any other refinancing restrictions. 

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Once you understand your current loan, the next step is to shop around for a better deal Many lenders have online prequalification tools that let you quickly check your rates without hurting your credit scores. To save time, you can also use a platform like RefiJet to compare quotes from multiple lenders at once. 

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As you prequalify with lenders, you’ll get estimates of the rates and terms available to you. If you find a loan you want, you’ll need to complete the full application and allow a hard credit check. Upon approval, your new lender will typically pay off your old loan and start your new repayment plan. 

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Note: The bulk of the refinancing process happens between you and your new lender. Your current lender only needs to be contacted to coordinate the loan payoff and title transfer.  

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Can a dealership stop you from refinancing your car?

Auto dealers can’t stop you from refinancing your car, but they may discourage it. In most cases, dealerships aren’t directly involved in refinancing because they don’t provide buyers with loans. They instead sell cars and connect buyers with third-party lenders to earn a commission. However, a dealership might arrange financing that includes refinancing restrictions, such as prepayment penalties (in states where they’re allowed). These fees increase the cost of paying off or refinancing early, which can negate the benefits you’d otherwise reap. 

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Warning: Unscrupulous finance managers or sales representatives may falsely suggest that you have to wait a certain period to refinance in an attempt to protect their commissions but the truth will be in your loan contract. 

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When to tell your dealership about a refinance

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You don’t need to notify your dealership if you’re planning to refinance. Further, you often don’t even need to notify your current lender. Your refinance is made with a new lender who typically pays off your existing loan on your behalf. Your old lender is notified through the payoff. In cases where you’re responsible for paying off the loan manually, you’ll receive the funds and will need to contact your lender to request the payoff. 

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However, you can contact your dealership or lender about refinancing at any time if you’d like. This may be helpful if you have questions about a prepayment penalty, want to negotiate terms or need details such as your payoff amount. Additionally, once your refinance is complete, you may want to contact them to confirm the payoff was completed or ensure the title was released.

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How to check if your car loan has restrictions

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You can check if your car loan has refinancing restrictions by reviewing your loan contract and Truth-in-Lending disclosures. Key clauses to look for include those referencing prepayment penalties and refinancing waiting periods. If your dealership or lender mentioned any requirements that aren’t in the contract, they won’t be legally binding — but you may still want to contact them for clarification. Understanding these terms upfront can help you avoid surprises as you go through the refinance process.

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Steps to ensure a smooth refinancing process

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When you’re preparing for the refinancing process, the following steps can help ensure all goes smoothly:

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• Check your credit: Check your credit scores and reports. Ensure everything is accurate and look for opportunities to make quick improvements.
• Analyze your budget: Review your budget and decide on the maximum amount you’re able and willing to spend on your monthly car payment. Keep that number in mind as you review quotes, especially if you’re looking to shorten your loan term.
• Review your current loan: Pull up your current loan. Take note of the outstanding loan amount, monthly loan payment, interest rate and remaining cost. 
• Shop around: Shop around and collect quotes from different auto refinance lenders. A wide range of lenders exist with different eligibility requirements and offerings. 
• Run the numbers: Take note of the interest rates, monthly payments and overall costs of the quotes and compare them to your current loan. Look for the best deal. 
• Ensure your loan gets paid off: Once you get the new loan, make sure your old loan gets paid off and you don’t miss any payments in the meantime. 
• Make on-time payments: Start making payments to your new lender and ensure you make them all on time.
• Check-in on the title: Track the progress of your title transfer. Your old lender will need to release it and your new lender will need to be added to it. 

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Those are the basics. If you’re ready to get started, RefiJet can help you quickly shop around and compare auto refinance quotes. Get prequalified in minutes to start shopping.

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FAQs

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Read on for quick answers to common questions about refinancing after buying a car through a dealer. 

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Can your existing lender stop or impact your refinancing?

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A lender can impact the refinancing process but can’t typically stop it. Your existing lender will be paid off and must mark your loan as paid in full and release the title. If they delay either of those steps, it can cause problems.  

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Do you have to tell the dealership that you're refinancing?

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No, you don’t have to tell the dealership that you’re refinancing. Your new lender will typically pay off your existing loan, which settles it. But you can contact your dealership or lender with any questions or concerns you have about the process. 

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What are reasons you can be denied for refinancing?

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Auto loan refinance lenders look at a variety of factors to determine if you qualify, such as your income, credit, location, age, current equity and employment status. You may be denied for a range of reasons, such as insufficient credit, unstable income or being underwater on your loan. 

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Do you have to notify the DMV when refinancing your car?

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In most cases, you don’t need to personally notify the DMV when refinancing your car. However, the new lender typically handles the title transfer process, which involves updating the lienholder information with the DMV.

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