Auto Loan Refinance Calculator

When does refinancing a car loan pay off?

Refinancing replaces your current car loan with a new one, ideally at a lower interest rate. It makes sense when your credit score has improved since you bought the car, when market rates have fallen, or when you took dealer financing without shopping around. It saves money only if the interest you avoid is larger than any fees, and only if you do not stretch the loan so far that the extra months eat the savings.

Payment = B × r ÷ (1 − (1 + r)^−n)
B = balance (plus fees if financed), r = APR ÷ 12, n = months
Net savings = (old payment × months left) − (new payment × new months) − fees paid upfront
Break-even = fees ÷ monthly saving

Worked example

You owe $22,000 at 9.5% APR with 48 months left. A credit union offers 6% APR for 48 months with $300 in fees paid upfront.

• Current payment: 22,000 at 9.5% over 48 months = $552.71; interest still to pay $4,530.03
• New payment: 22,000 at 6% over 48 months = $516.67; interest $2,800.19
• You save $36.04 a month; the $300 fee is paid back in 9 months
• Net savings over the loan: (552.71 × 48) − (516.67 × 48) − 300 = $1,429.84

The longer-term trap

Lenders often advertise refinancing by how much lower your monthly payment gets. A big part of that drop usually comes from a longer term, not the lower rate. In the example, taking the new 6% loan over 60 months instead of 48 cuts the payment to $425.32, which looks like a $127 monthly saving. But you would pay $3,519.30 in interest and $25,519.30 in total, compared with $26,530.03 if you kept the old loan: you still come out ahead, but by about $1,000 instead of $1,700 (before fees), and you pay for the car for an extra year.

If you need a lower payment to get through a tight period, a longer term can be the right call. Just know you are trading total cost for monthly breathing room.

Refinancing late in the loan

Because each payment covers interest on the remaining balance first, most of a car loan's interest is paid in the early years. That makes refinancing much less useful near the end. Say you owe $6,000 at 9.5% with 12 months left. Your payment is $526.10 and only $313.21 of interest remains. Refinancing to 6% for 12 months lowers the payment to $516.40, a saving of just $9.70 a month and $116.43 in interest. With a $300 fee you would end up $183.57 worse off. The calculator shows this as a negative result, so try it with your own payoff balance before you apply.

What to check before you refinance

• Your credit score. The best rates go to borrowers with strong credit. If your score has gone up since the original loan, refinancing is more likely to help.
• The car's age, mileage and value. Many lenders do not refinance older cars or loans where you owe more than the car is worth.
• Prepayment penalties on the current loan. Rare on car loans but worth checking in your contract.
• Fees. Some lenders charge an application or origination fee, and your state may charge a title transfer fee to change the lienholder.
• Time left on the loan. Interest is front-loaded, so with only a year or so left, most of the interest is already paid and refinancing saves little.

Common mistakes

• Judging the deal by the monthly payment. Compare the total of all remaining payments plus fees.
• Using the original loan amount. Enter today's payoff balance, which your lender can give you, not the amount you first borrowed.
• Forgetting that many applications in a short period can affect your credit. Rate shopping within a short window is usually treated as a single inquiry for scoring, but ask each lender how they check credit.

Figures assume fixed rates, monthly payments and that the current loan would otherwise run to term. Ask the new lender for a written offer showing the APR, term and fees.

Frequently asked questions

Sources

• Consumer Financial Protection Bureau (US). Should I refinance my auto loan? and Auto loans: key terms.
• Federal Trade Commission (US). Financing or leasing a car, consumer advice.

Last reviewed 20 October 2026. Results are estimates; see our disclaimer.