What is auto loan refinancing?

Auto loan refinancing replaces your existing car loan with a new one—ideally at a lower rate, a different term, or both. The new lender pays off your current balance, and you make payments under the new terms. The primary goals are to reduce monthly payment, cut total interest, speed up payoff, or some combination of the three.

Refinancing doesn’t change your vehicle; it changes how you finance it. Depending on your credit profile, vehicle age and mileage, and market rates, you may qualify for a meaningfully lower APR than when you first financed the car. That lower APR can translate into hundreds or even thousands saved over the remaining life of the loan.

When refinancing makes sense

• Rates have fallen since you took out the original loan.
• Your credit improved (higher score, fewer delinquencies, lower utilization).
• You want a different term to lower monthly payment or pay off faster.
• You financed through a dealer at a high rate and can now shop banks or credit unions.
• Your income changed and you need a more manageable payment for a period of time.

How to use this calculator

Start with the remaining balance, current APR, and remaining term from your existing statement. Enter the new APR and new term from your refinance quote. Add reasonable refinance fees such as origination, title, and state filing fees, and choose whether to pay them upfront or roll them into the loan principal. If you plan to pay extra each month on the new loan, add that amount under Advanced options.

1. Enter Remaining loan balance, Current APR, and Remaining term.
2. Enter New APR and New term. Check Keep same payoff date to lock the new term to the remaining term.
3. Enter Refinance fees and choose whether to add them to the loan or pay upfront.
4. Optionally add an Extra monthly payment to accelerate payoff after refinancing.
5. Review the results: monthly payments, total interest, break-even, and lifetime savings.

How the math works

The calculator uses the standard amortization formula. For a monthly rate r, term n, and principal P, the monthly payment is M = P * r / (1 − (1 + r)−n) when r > 0, or M = P / n when r = 0. Your current loan’s payment and total remaining cost are computed from your remaining balance, current APR, and remaining months. For the refinance, fees increase the new principal only if they’re financed; otherwise they appear as an upfront cost.

Monthly savings is the difference between old and new payments (excluding voluntary extra). Break-even occurs when cumulative monthly savings equal the upfront cost. Lifetime savings is the difference between the current loan’s remaining total payments and the refinanced loan’s total payments, after accounting for fees. For the amortization preview and the chart, we simulate month-by-month balances, interest, and principal. If you add an extra payment, we shorten the payoff accordingly and reflect an earlier payoff date.

Pros and cons

Pros

• Lower APR can reduce both monthly payment and total interest.
• Flexible terms can align payments with your budget.
• Option to roll fees into the loan if cash is tight.
• Extra payments can accelerate payoff for more savings.

Cons

• Extending the term may increase total interest even if the payment drops.
• Fees can eat into savings; if savings are small, break-even may be far out.
• Older vehicles or high mileage can limit refinance options.
• Hard inquiries and new accounts can impact credit temporarily.

FAQs

Does refinancing affect my credit? A hard inquiry and a new account can slightly reduce your score in the short term, but on-time payments can offset that over time.

Can I refinance with negative equity? Often yes, but lenders may cap loan-to-value. Rolling negative equity forward can raise costs.

Is there a prepayment penalty? Many auto loans have none, but always check your current contract.

How soon can I refinance? Some lenders allow it after a few months; others require more history.

What fees should I expect? Origination, title transfer, lien recording, and sometimes state taxes or document fees.

Disclaimers

This tool is for education and planning only and does not constitute financial advice. Results depend on the accuracy of your inputs and assumptions. Lender offers and eligibility vary. Always review official disclosures before signing any agreement.