So you got a bad deal at the car dealership…you’re not stuck!

A woman driving in her car smiling - Upstart Personal Loans

Disclaimer: Upstart is not a financial advisor, the following content is for informational purposes only.

Oops, you realized you may have gotten a bad deal at the dealership. Maybe it was an impulse purchase or a very convincing salesperson persuaded you to go beyond your budget. Or perhaps you’re now struggling to pay your other bills after purchasing the car and don’t feel comfortable with the monthly payment amount. 

If you’re experiencing mechanical problems, you may be able to take it back to the dealership, depending on your warranty (if you purchased one) and your state’s lemon laws. If there are no mechanical issues with the car, under contract, you must continue paying for the vehicle and likely cannot return it to the dealership. 

Whatever situation you’re in, if you’re thinking of getting out of your car loan, there are a few options. Figuring out which one makes the most sense depends on your situation and preference for wanting to keep the car and refinance the loan, sell or trade it in, for example.

Here’s what you need to know to put yourself in a better financial position if you believe you’ve gotten a bad deal at the dealership. 

How to determine if you got a bad deal on your car loan

The definition of “bad” is subjective, but generally speaking, determining if you got a bad deal on your auto loan boils down to affordability and your monthly budget. These factors may likely make your car a source of strain for you:

  • Your payments are too high and you’re stretching your budget too thin.

  • The interest rate is high for your credit score range. (If your credit has improved since the time you took out the loan, you may be able to qualify for a less expensive interest rate.)

  • The price of the car was too high.

  • The “extras” you purchased (i.e., vehicle warranty) were too expensive or unnecessary. 

What is considered a good interest rate?

The interest rate should generally not be higher than what you’d pay on a credit card. At the time of writing, the average credit card interest rate is around 18 percent. If it’s higher than that, you should consider getting out of it quickly with a refinance. 

According to Experian, these are the average interest rates you might expect to pay for an auto loan, based on your credit score range. 

Credit score range Average APR for new auto loan Average APR for used car
Super Prime (781-850) 3.65% 4.29%
Prime (661-780) 4.68% 6.04%
Subprime (501-660) 7.65% 17.74%
Deep Subprime (300-500) 14.39% 20.45%


Refinance your car loan

Consider refinancing if you’re unhappy with the interest rate, monthly payment, terms of your auto loan, or all of the above. If you’re concerned about keeping costs down, refinancing makes more sense than going out to get a new car. Keep in mind there are a few fees to pay when you refinance, and Upstart takes care of these fees for you. When you refinance, over purchasing another vehicle, you’ll also avoid expensive sales tax as well as the temptation to purchase a pricier car.

When you refinance, you’re essentially getting a brand new loan to pay off your existing one with the goal of lowering the interest rate and monthly payment. 

Check your credit score before you decide to go this route. If your score needs improvement, you may need to spend a few months paying your bills on time or paying down other debt before you apply. Otherwise, you may not qualify for a better interest rate. 

Some lenders examine alternative data outside your credit score to determine whether you qualify. For example, Upstart-powered banks also looks at your education* and employment, which is one reason why Upstart’s underwriting model is unique from other lenders. 

How to refinance your auto loan

Because you’re taking out a brand new loan when you refinance, you can change the term, or length of how long you have to pay back the loan. If you originally took out a three-year loan but found it difficult to keep up with the high payments, you could refinance to five years. Keep in mind that a longer loan term means you will pay more over the life of the loan in interest. 

Before you jump into a refinance, make sure you won’t have to pay any fees or penalties for paying your current loan off early. Once you confirm you won’t get charged, you can start shopping around for the best interest rates online. 

Remember that you can still shop around for the best score within a certain time frame (usually 30 days) and the hard pull will only count as a single inquiry. This is referred to as rate shopping.

Alternatives to fixing a bad deal at the dealership

If you don’t want to refinance, there are a few other options to consider. 

Trade-in your car: If you’re going this route, go for a less expensive vehicle. This downgrade will help reduce your overall auto debt.

Sell your car, private party: This may require more effort and time on your part, as there are a few more steps involved when selling your vehicle without your title (meaning, it’s still technically owned by the bank), including:

  • Asking your lender for the payoff balance

  • Obtaining the value of your car—you can do this through Kelly Blue Book or Edmunds

  • Paying off the vehicle so the lender can release the title to the new owner

There’s a possibility that you may also end up upside down on your loan, which means your car’s value is less than your loan’s payoff amount. For example, if your car is worth $20,000 but you still owe $25,000 on the loan, you may have a tough time finding a private buyer who would be willing to pay you $25,000 for the vehicle. 

Avoid getting a bad auto loan next time

Mistakes happen for a reason and sometimes, the lesson needs to be learned first-hand in order to avoid making the same ones in the future. Here’s what to do in order to not make the same mistakes the next time you need to purchase a car:

  • Shop around for the best rates and compare multiple offers from lenders.

  • Choose a loan term that is realistic for you, even if it’s longer than what you want.

  • Put a down payment of at least 20 percent, if you can. This helps reduce the overall cost of your loan.

Refinancing from a high to lower interest rate can make a big difference in your monthly budget and can help you better manage your payments. 

The good thing about refinancing is that you can do it completely online and receive your interest rate almost instantly. 

Find out how Upstart can help you get out of a bad deal at the dealership and get your rate in just a few minutes without affecting your credit score. 

State Restriction: Car refinance loans not available in IA, MD, NV, or WV. Car refinance loans in IL and MO are originated by Cross River Bank or Midwest BankCentre. All other car refinance loans are originated by Cross River Bank, an FDIC New Jersey state chartered commercial bank.

*Neither Upstart nor its bank partners have a minimum educational attainment requirement in order to be eligible for a loan

Simple and easy car refinance through Upstart.

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