When refinancing a car loan makes sense
Refinancing replaces your current loan with a new one, ideally at a lower rate. It tends to help when your credit score has improved since you bought the car, when market rates have fallen, or when the dealer arranged a loan at a higher rate than you could have gotten elsewhere.
How this calculator works
It finds your current payment from your balance, rate, and months left. It then finds the new payment from the same balance at the new rate and term. Total savings is what you would still pay on the current loan, minus what you would pay on the new one plus any fees. A positive result means refinancing costs less overall.
Watch out for a longer term
A longer term can lower your monthly payment and still cost more in total, because you pay interest for more months. If the calculator shows a lower payment but a negative savings figure, that is what is happening. Try a new term close to your months left to compare fairly.
How to compare refinance offers
- Get quotes from a credit union, a bank, and an online lender.
- Compare the APR, not just the interest rate or the payment. The car APR calculator finds the APR for any offer.
- Ask about fees, and whether the lender charges for paying off the old loan early.
- Check that you would not end up owing more than the car is worth. The negative equity calculator shows where you stand.
Frequently asked questions
When is a good time to refinance a car loan?
Usually after your credit has improved, after rates have dropped, or early in the loan while the balance is still large. The longer you have owned the loan, the less interest is left to save.
Does refinancing hurt my credit?
The new lender will check your credit, which can cause a small, temporary dip. Over time, steady on-time payments on the new loan matter more.
Can I refinance if I owe more than the car is worth?
It can be harder. Many lenders limit how much they will lend compared to the car's value. Paying the balance down first can help.
What are break-even months?
It is how many months of lower payments it takes to make back the fees you paid to refinance. If you plan to sell the car before then, refinancing may not be worth it.