Auto Loan Refinance Calculator
Calculate your monthly payment savings and lifetime interest savings by refinancing your car loan.
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Saving $1,475
Current Interest
Refinanced Interest
| Calculation Items | Current Auto Loan | Refinanced Auto Loan |
|---|---|---|
| Monthly Loan Payment | $542 | $511 |
| Total Remaining Interest | $4,021 | $2,546 |
| Total Remaining Payments | $26,021 | $24,546 |
| Amortization Loan Term | 48 Months | 48 Months |
How Car Loan Refinancing Works
Auto loan refinancing replaces your current car loan with a new loan from a different lender, ideally at a lower interest rate or with a revised repayment term. The new lender pays off your existing loan balance in full, and you begin making monthly payments to the new lender under the updated contract terms.
When Should You Refinance a Car Loan?
Refinancing makes financial sense in several specific scenarios:
- Interest Rates Have Dropped: If market interest rates have declined since you first financed your vehicle, refinancing can secure a lower APR.
- Your Credit Score Has Improved: If your credit rating has gone up due to consistent on-time payments or paying down other debts, you will qualify for much lower interest rates than when you first bought the car.
- You Financed at the Dealership: Dealerships often markup interest rates (dealer markup) to increase their margins. Refinancing through credit unions or direct online lenders can remove these margins.
- You Need Lower Monthly Payments: If your household budget is tight, refinancing to a longer loan term will lower your monthly bills, though it may increase total interest costs over time.
How Auto Refinancing Affects Your Credit Score
Refinancing involves a temporary credit impact. When you apply, the new lender performs a **hard credit inquiry** (hard pull), which can temporarily dip your credit score by a few points. However, if you shop around within a 14-day window, credit bureaus treat multiple auto queries as a single pull. Once the new loan is active, consistent on-time payments will build your credit history, offsetting any minor initial dips.
Common Auto Refi Mistakes to Avoid
- Extending the Term Too Far: While extending your loan from 36 months to 60 months lowers monthly payments, you will pay interest for two additional years, which can wipe out any savings from a lower interest rate.
- Ignoring Prepayment Penalties: Check your current loan contract for prepayment penalties. If your lender charges a high fee for early payoff, it may negate your refinancing savings.
- Refinancing an Upside-Down Loan: If you owe more on the vehicle than it is currently worth (negative equity), lenders may deny your application or require you to pay the difference upfront.