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Last updated: December 14, 2023

Auto Refinance Calculator

How much can you save on your loan by refinancing?

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Enter the balance remaining on your loan, current interest rate, current monthly payments, and new interest rate to see how much you’ll save if you refinance your auto loan, assuming you keep your existing loan term.

Why refinance your auto loan?

Refinancing your auto loan is essentially replacing it with another loan, which can allow you to pay less interest over time or lower your monthly payments. If you think you can get a better loan — for example, if your credit score has improved — refinancing your loan can save you money.

RELATED:

Check out our round up of the best auto loans for refinancing.

When is it a good idea to refinance an auto loan?

When you should refinance an auto loan

  • Your credit score has improved. In general, the main reason to refinance your auto is if you qualify for a better interest rate, which happens when you have better credit. If your credit score has gone up by 30 points or more, it’s worth looking into refinancing your auto loan.
  • You financed at the dealership. Dealer’s lenders typically don’t have the best interest rates, so shopping around for a new loan could save you money. Our Dealer vs. Bank Financing Calculator helps you compare which institution it’s better to finance through.
  • Interest rates have gone down. Interest rates are variable and fluctuate with economic conditions. If interest rates have gone down since you purchased the car, you could save by refinancing. (Note: unfortunately, interest rates are higher right now than they have been in the past).
  • You want to lower your monthly car payments. If your financial circumstances have changed and you’re struggling to keep up with your monthly car payments, refinancing your loan can lower your monthly payments and give you some breathing room in your budget. Keep in mind that the longer your loan term, the more you’ll pay in interest.

When you shouldn’t refinance an auto loan

  • Refinancing will put you “under water.” If you extend your loan term too long, you risk ending up with negative equity or “under water” on your loan, meaning you owe more on the car than it’s worth.
  • You owe too much or too little on your current loan. If you’re nearly done paying off your car, it probably doesn’t make sense to refinance your loan (instead, you can save by paying off your loan more quickly). On the other hand, if you currently owe more than your vehicle is worth (negative equity), you likely won’t get a good deal refinancing.
  • You’ll pay a price in penalties and fees. Review your existing loan agreement for prepayment penalties or fees. Additionally, ask the new lender about fees associated with the refinancing, such as application fees or closing costs. If the fees are more than or similar to what you’ll save, it probably isn’t worth refinancing.

DID YOU KNOW?

Another way to save on interest is to accelerate your current loan by increasing your monthly payments. Our Auto Loan Payoff Calculator will help you estimate how much you’ll save.

What are the requirements to refinance a car loan?

Refinancing a loan is similar to initially applying for a car loan, though the new lender may have some additional requirements specific to refinancing. For example:

  • Your current loan is at least six months old
  • You’ve made payments on time
  • Your vehicle is less than 10 years older and has fewer than 100,000 to 150,000 miles
  • The ratio of your loan to the car’s value is no more than 125 or 150 percent
  • You have at least two years and $5,000 remaining on your current loan

How do I refinance my auto loan?

  1. Review the status of your finances and current loan. Check your credit score, the current value of your car (Kelley Blue Book offers a free tool), and your current loan terms to see how much you could save by refinancing.
  2. Shop around with refinancing lenders. To find the best auto loan, shop around with a few lenders — including your current lender if it offers refinancing — to compare rates, deals, and fees. You can usually leverage your options to negotiate a better offer from your preferred lender.
  3. Gather your documents. To apply for refinancing, you’ll need proof of income (such as pay stubs or W-2), proof of address, and proof insurance. You’ll also need information on your vehicle, such as make, model, trim, VIN, and mileage.
  4. Submit an application and finalize your loan. When you apply, the lender will appraise your car and run a hard inquiry on your credit. Once the loan is finalized, your new lender will pay off the loan balance from the old lender, and you’ll start making your new monthly payments. The refinancing process takes anywhere from less than a day to a couple weeks.

TIP:

If you’re looking to lower your overall monthly car expenses, compare quotes from a few car insurance companies to see if you can get a better insurance rate.

Refinancing FAQ

What is a good interest rate for a car refinance?

A good interest rate for a car refinance is one that is lower than the interest rate on your current loan. The definition of “good” is subjective and depends on factors like your credit score, market conditions, and the lender’s terms.

Compare your credit score and interest rate to the following table to get a sense of where your refinancing offer falls:

Credit score Average loan rate for new car Averaged loan rate for used car
579 or lower 14.08% 21.32%
580-619 11.53% 18.55%
620-659 8.86% 13.28%
660-719 6.40% 8.75%
720 or above 5.18% 6.79%

Source: Experian1

Should you put money down when refinancing a car?

You usually don’t need to put money down when refinancing a car, though there are some advantages to doing so.

Pros of down payment when refinancing:

  • Reduced loan amount: A down payment reduces your total loan amount, which could qualify you for a better interest rate and will lead to a smaller overall debt.
  • Lower monthly payments: The lower your loan amount, typically the lower your monthly payments (assuming you didn’t extend your loan term).
  • Improved loan-to-value ratio: A down payment can improve your loan-to-value (LTV) ratio, which is the ratio of the loan amount to the car’s appraised value. A lower LTV ratio may lead to more favorable loan terms.

Cons of down payment when refinancing:

  • Tying up cash: Using cash for a down payment means that money is no longer available for other purposes, such as emergency funds or other investments.
  • Depreciation: If you make a down payment in order to extend your loan term, you risk your car depreciating faster than you’re paying down the loan, potentially leading to negative equity.

When deciding whether or not to put money down on a refinance, weigh the cost of the cash to the potential benefits, and see whether you can negotiate a better interest rate solely based on your credit score.

What is a good credit score to refinance a car?

A credit score of 720 or more will get you the best rates when refinancing a car. In general, you want a credit score of at least 660 when refinancing in order to get reasonable interest rates.

Is it smart to trade in a car that isn’t paid off?

The U.S. Consumer Financial Protection Bureau generally recommends paying off the balance on your loan before trading in a vehicle, so that your loan balance isn’t rolled into a new loan.2 When you roll over an existing balance, you increase your total loan costs and the amount of interest you’ll pay over the life of your loan. If you owe more on the car than its trade-in value, it’s advisable to wait until you pay off the loan (or pay it off all at once if you can) before trading it in.

Citations

  1. What Auto Loan Rate Can You Qualify for Based on Your Credit Score? Experian. (2023, Jul 5).
    https://www.experian.com/blogs/ask-experian/auto-loan-rates-by-credit-score/

  2. Should I trade in my car if it’s not paid off? Consumer Financial Protection Bureau. (2023, Sep 12).
    https://www.consumerfinance.gov/ask-cfpb/should-i-trade-in-my-car-if-its-not-paid-off-en-2045/