Why Car Loan Refinancing Is a Bad Idea

You might think you can boost your cash flow by refinancing your car loan.

But such a move might not improve your cash flow by as much as you might think --- and it also could increase the term and overall costs of the loan.

"There just aren't a lot of situations where refinancing [an auto loan] makes sense," says F. John Deyeso, a certified financial planner in New York City.

One problem: Autos tend to depreciate rapidly -- typically about 45% in the first three years, according to Consumer Reports. The value of your car is likely to decline faster than the principal you owe, leaving you with an "upside down" loan, meaning you owe more than the car is worth. ...