Car Refinance Calculator

Refinancing your car loan with a lower interest rate than your current rate can save a significant amount in both monthly payments and total interest costs.

Car refinancing can also allow you to adjust your loan term or even tap into some of the equity you have in your vehicle. Whether you plan to pay off your car loan faster or free up cash flow, it is always a good idea to explore the refinancing option via this Car Refinance Calculator.

Current Auto Loan Rates for March 2023

Get prequalified loan offers in 2 minutes or less-with no impact to your credit score.

How to Use This Car Refinance Calculator

In order to obtain an accurate estimate of your new loan amount and how much you can save, this tool requires basic information about your current auto loan, such as the loan amount, interest rate, loan term, etc.

This information can be easily found on your monthly statement or in the user portal of your current lender. Contacting the dealer or lender may be a good idea to obtain comprehensive information if necessary.

There are two major sections in this calculator: the Current Loan section and the New Loan section. First, input the basic information about your current loan. Then, fill in the new loan offer in the New Loan section. You will see the new monthly payment amount and other details after clicking the "Calculate" button.

Current car loan information you will need

  • Original loan amount: The initial amount you borrowed to finance your vehicle.

  • Current interest rate: The annual percentage rate (APR) you're currently paying on your loan.

  • Current Loan Term length: The total number of repayment months specified in the initial contract. Typically, lease car terms are 24 or 36 months, while 60 or 72 months are for buying options.

  • Balance of current loan: The remaining loan amount you still owe to your current lender.

  • Months left on current loan: The number of months remaining until you fully repay the loan.

Input new refinanced car loan information

  • Refinanced loan amount: The new loan amount you plan to borrow for refinancing your existing loan This typically includes the remaining balance of the current loan and any additional fees or costs associated with refinancing.

  • New Loan Term: The total number of months you plan to repay the new refinanced loan may be equal to, less than, or greater than your existing loan term, depending on the borrower's repayment schedule.

  • New interest rate: The annual percentage rate (APR) that the new lender offers you for the refinanced loan.

What is Car Refinancing?

Car refinancing simply means that you are applying for a new auto loan with updated terms to replace an existing car loan.

The primary reason for refinancing is to secure better loan terms, such as a lower interest rate or a more favorable loan duration. By refinancing, borrowers may be able to reduce their monthly payments, save on interest costs, or adjust the length of their loan term to suit their financial situation better.

When you refinance your car loan, the new lender pays off your current loan and transfers it from your current lender to the new lender. You will start making adjusted payments to the new lender based on the refinance loan agreement.

The refinance process does not change the loan amount you owe on your car but provides a more favorable interest rate or loan repayment term, allowing you to reduce the monthly payment or pay off your loan faster.

How Does Car Refinancing Work?

Car refinancing works by replacing your existing auto loan with a new one, ideally with more favorable terms. To help illustrate how car refinancing works, let's consider a numerical example.

Suppose you have an outstanding auto loan with the following details:

  • Original loan amount: $25,000
  • Current interest rate: 7%
  • Length of the current loan: 60 months
  • Balance of current loan: $15,000
  • Months left on current loan: 36 months

You find a new lender who offers you a refinanced loan with the following terms:

  • Refinanced loan amount: $15,000 (equal to the remaining balance of your current loan)
  • New loan term: 48 months
  • New interest rate: 4%

In this example, your monthly payment can be significantly reduced by accepting the refinance offer in two parts: 1) The interest rate is reduced from 7% to 4%; 2) The loan term is extended from 36 months to 48 months.

This new offer can guarantee a lower monthly payment, but the total interest costs are higher. As a borrower, you will need to make a trade-off between short-term cash flow and long-term interest savings.

When Should You Refinance an Auto Loan?

There are several situations when refinancing an auto loan may be beneficial for borrowers:

  • You financed through a dealership: Taking out a loan with a dealership when buying or leasing your car is very common, but it usually comes with higher interest rates. You may consider refinancing with a bank, credit union, or online lender for a better offer.
  • Your credit score improved: If your credit score has increased recently, you may qualify for a lower interest rate loan than the original car loan.
  • You want to lower your monthly payment: Refinancing can help you lower your monthly payment, either by securing a lower interest rate or extending the loan term. This can provide relief if your financial situation has changed and you need to reduce your monthly expenses.
  • Interest rates have dropped: If market interest rates have decreased since you took out your original loan, refinancing may enable you to take advantage of the lower rates and reduce your overall interest costs.
  • You want to adjust repayment term: Refinancing your car loan can help you adjust the repayment term of your auto loan, either shortening it to save on total interest costs or lengthening it to reduce the monthly payment amount.
  • You want to remove or add a co-signer: If your original loan included a co-signer, refinancing allows you to remove them from the loan or add a new one, depending on your needs and circumstances.

When You Shouldn't Refinance a Car Loan

Here are some situations when it might not be advantageous to refinance:

  • You owe too little or too much on your current vehicle: If you have a very small outstanding loan balance, the potential savings from refinancing may not be significant enough to justify the effort.
  • On the other hand, if you owe significantly more on your loan than the current value of the vehicle (known as being "upside-down" or "underwater" on the loan), it can be challenging to find a lender willing to refinance your loan.

  • There is a prepayment penalty: Some lenders charge prepayment penalties if you pay off the loan earlier than the agreed-upon period in the contract. This can increase your total refinancing cost, making it worse in some cases.
  • You're applying for another major loan: Refinancing a car loan requires a hard inquiry on your credit report and can lower your credit score by a few points or even double digits.
  • Additionally, taking a new loan will impact your credit history length. Therefore, if you plan to apply for a mortgage, personal loan, or line of credit, this action may be perceived negatively.

    In the worst-case scenario, it could drag you down to a lower credit score range, which may significantly increase your interest rate for these loans.

  • Your car is too old or has high mileage: Some lenders have restrictions on refinancing older vehicles or those with high mileage. If your car exceeds these limits, you may have difficulty finding a lender willing to refinance your loan.
  • The costs exceed the savings: You shouldn't focus solely on the interest rate and monthly payment, as car financing is associated with many other expenses, such as origination fees, processing fees, and other potential charges.
  • When the costs exceed the savings from refinancing, taking out a new loan is no longer a good idea.

What Factors Affect Refinancing Your Car?

There are several factors that lenders consider when evaluating your refinancing application. Understanding these factors can help you maximize your chances of approval and secure the best possible loan terms.

Credit score

The credit score is a critical factor in determining your eligibility and the offers you can get. Basically, a higher credit score allows you to borrow at a lower rate and on more favorable terms, and vice versa.

However, it depends on the credit score range rather than adjusting point by point. Additionally, the lender will collect your credit reports from all three credit bureaus and select the middle score.

Debt-to-income (DTI) ratio

Debt-to-income ratio is another important factor that affects a lender's decision and offer. Credit cards, student loans, medical bills, mortgages, and all other loans can impact this figure. We suggest keeping the number at 36% or lower to increase the odds of approval.

Pre-tax income

Your pre-tax income plays a role in determining how much you can afford to pay each month for your car loan.

Lenders typically have minimum income requirements for refinancing, which can vary depending on the lender and the loan amount. Be prepared to provide proof of income, such as pay stubs or tax returns, to demonstrate your ability to repay the loan.

Vehicle value

Lenders will assess the current value of your vehicle compared to the outstanding loan balance to determine the loan-to-value (LTV) ratio.

If your LTV ratio is too high (meaning you owe more on your loan than the car is worth), it can be challenging to find a lender willing to refinance your loan.

To improve your LTV ratio, consider making extra payments on your current loan to reduce the balance or waiting until your car's value has increased.

Loan term

The length of the new loan term can affect the monthly payment amount and overall interest costs of refinancing.

As we mentioned in a previous example, a longer term will result in a lower monthly payment amount but higher overall interest costs, while a shorter term will increase your monthly payment but save more in total interest costs.

Interest rates

Interest rates are the key element for any type of loan. By principle, it determines the financial cost of a loan, and a lower interest rate is better.

You will never want to choose a higher interest rate on a refinance if you aim to reduce the cost of a car loan.

Additionally, you should closely examine the Annual Percentage Rate (APR), as this rate includes not only the given interest rate but also other fees associated with the loan, such as the fees and penalties mentioned in the following section.

Fees and penalties

Be sure to account for any fees and penalties associated with refinancing, such as origination fees, processing fees, and prepayment penalties from your current lender.

These costs can impact the overall savings and benefits of refinancing, so it's essential to evaluate whether refinancing is still worthwhile after considering these expenses.

Where to Apply for Refinancing


Bank refers to a financial institution that accepts deposits, offers checking account services, makes various loans, and offers basic financial products like certificates of deposit (CDs) and savings accounts to individuals and small businesses, including auto loan refinancing.


  • Regulated and reputable institutions with mature loan-providing experience.
  • Potential for lower interest rates and fewer hidden fees if you have an existing relationship or a high credit score.
  • May offer additional benefits such as late fee waiver and rate discount to existing customers.


  • May have stricter eligibility requirements compared to other lenders
  • Might not offer the most competitive rates for borrowers with less-than-perfect credit
  • Customer service and responsiveness can vary depending on the size of the bank

Credit Unions

A credit union is a not-for-profit financial cooperative providing traditional banking services to its members.

Owned and operated by its participants, credit unions range in size from small volunteer-run groups to large national entities and can be formed by corporations, organizations, or other entities for their employees and members.


  • Often provide lower interest rates and fees compared to banks
  • Focus on customer service and building relationships with members
  • May be more willing to work with borrowers who have lower credit scores or unique financial situations


  • The applicant must be a member of the credit union.
  • There are fewer branches and ATMs, inadequate online banking experience, and limited resources compared to those of large banks.

Online Lenders

Online lenders are financial institutions that operate primarily on the Internet, offering a convenient and streamlined application process for borrowers.

Online lenders are private financial institutions that offer any kind of loans online and not directly from a traditional bank. All application and approval decisions are conducted online without physical touch.


  • Easy and fast application with a quick approval process.
  • Competitive interest rates and terms, especially for good credit score applicants.
  • There are numerous lenders that borrowers can compare to find the best offer.


  • Lack of in-person support, which may be a drawback for borrowers who prefer face-to-face interactions
  • Some online lenders may have less established reputations compared to banks and credit unions
  • Potential for hidden fees or unfavorable terms, so it's essential to carefully review loan agreements

When choosing a lender for refinancing, it's crucial to compare offers from multiple institutions to find the best terms and interest rates. Be sure to consider factors such as interest rates, loan terms, fees, and the lender's reputation when making your decision.

How to Refinance a Car Loan

Refinancing a car loan can be a straightforward process if you follow these steps:

1. Determine if auto refinancing makes sense for you

Before applying for refinancing, it's essential to evaluate whether it's the right financial decision for you. Ask yourself the following questions:

  • What is the purpose of refinancing? To reduce monthly payments or save on total interest costs?
  • What fees will you be responsible for when refinancing?
  • What is the market value of your car? Is your loan balance higher than the value of your vehicle?
  • Do you have a prepayment penalty on your current loan?
  • What is your current credit score?

2. Collect the necessary documents

To apply for refinancing, you'll need to gather various documents to support your application. These may include:

  • Proof of income (e.g., pay stubs, tax returns, or bank statements)
  • Proof of residency (e.g., utility bill, lease agreement, or mortgage statement)
  • Proof of insurance for your vehicle
  • Vehicle registration and title
  • Current loan statement, including your account number, loan balance, and interest rate
  • Driver's license or other government-issued identification

3. Consider applying for prequalification

Prequalification allows you to receive a preliminary loan offer from the lender without a hard credit inquiry, which won't negatively impact your credit score. This process can provide you with an estimated interest rate and terms you may receive from the lender without committing to the agreement.

However, prequalification doesn't guarantee final approval by the lender, and the actual terms and fees may differ from the initial offer.

4. Compare loan offers and choose a lender

Once you've gathered the necessary documents and prequalified with multiple lenders, compare the loan offers you've received. Consider factors such as:

  • Interest rates
  • Loan terms
  • Monthly payments
  • Fees and penalties
  • Customer reviews and lender reputation

Select the lender and loan offer that best aligns with your financial goals and needs.

5. Complete the formal application process

After choosing a lender, complete their formal application process, which may involve providing additional information or documentation. The lender will perform a hard credit inquiry, which can temporarily lower your credit score.

During the application process, be prepared to:

  • Verify your personal information and financial details
  • Submit any additional documents requested by the lender
  • Review and sign the loan agreement

6. Pay off your old loan and start making new monthly payments

After your refinancing application is approved, you will start making agreed-upon monthly payments to the new lender before the due date. You no longer make payments to previous lenders because the previous loan balance has been paid off by your new lender.

Many people may encounter issues with the first payment due to incorrect contact information or technical problems. Please be sure to contact your new lender if you don't receive the first statement to avoid any late fees or negative reports on your credit history for missed payments.

The Pros of Refinancing Your Auto Loan

  • Lower Interest Rates

A lower interest rate is the main concern in refinancing your car loan. Once the interest rate is lower than your original loan, refinancing will provide you with a cheaper borrowing option.

  • Smaller Monthly Payments

Refinancing your car loan can reduce your monthly payment either by extending the loan term or securing a lower interest rate. But remember that a longer term can increase the total interest cost of a car loan.

  • Reduce the Term of Your Loan

You can also choose a faster repayment schedule by refinancing your car loan. This will require a higher monthly payment amount but will raise your credit score once the loan has been paid off.

  • Cash Out for Emergencies

In some cases, you may be able to refinance your car loan with a cash-out option. This allows you to receive a portion of your car's equity in cash, which can be used to cover emergencies or other financial needs.

  • Changing Lenders

If you're unhappy with your current lender's customer service or loan management, refinancing can give you the opportunity to switch to a new lender that better meets your needs and expectations.

  • Remove or Add a Co-signer

Since a car refinance is considered a new loan agreement, you are able to add or remove a co-signer on the new auto loan. Removing a co-signer will increase your credit score faster if you make payments on time. Alternatively, you may add a co-signer to reduce the debt-to-income ratio for a more favorable loan offer.

  • Take Advantage of Promotions or Incentives

Some lenders may offer special promotions or incentives for refinancing, such as cash-back offers or reduced fees. Refinancing your car loan during these promotional periods can help you save even more money.

The Cons of Refinancing Your Auto Loan

  • Longer Repayment Periods

Longer repayment periods may be considered a negative aspect of car refinancing. Even though the monthly payments are reduced, you may end up carrying a higher total interest cost over the entire life cycle of the car loan.

  • Negative Equity

In some extreme circumstances, your vehicle‘s market value may be lower than the refinancing amount, and you are “underwater” on your loan.

It is more difficult to get loan approval because your car value doesn‘t cover the default risk. You may need to pay an additional down payment to eliminate the gap between the loan amount and the market value.

  • Prepayment Penalties

As stated above, some lenders may charge prepayment penalties if you pay off your loan earlier than the contract states. In this case, you need to find out the cost of the prepayment penalty and decide if it's worth taking the refinance offer.

  • Fees and Costs

The origination fees, processing fees, and documentation fees can add up to the total costs of taking out a refinance car loan, which normally needs to be paid upfront. These expenses can add up and increase your total costs, so it's better to consult with the lender before signing the final contract.

  • Impact on Credit Score

Applying for refinancing involves a hard credit inquiry, which can temporarily lower your credit score. If you plan to buy a house or apply for a personal loan within six months, multiple inquiries on your credit report will give a negative impression of these lenders.

  • Loss of Warranty or Other Benefits

In some cases, refinancing your car loan could cause you to lose certain benefits associated with your original loans, such as extended warranties or gap coverage. Be sure to review your current loan agreement and consult with your lender about any potential loss of benefits before refinancing.

FAQs about Car Refinance

It depends on your current loan terms and the new offers. You also want to clarify the purpose of refinancing, whether it is to reduce monthly payments or save in the long term.

In general, it is always a good idea to refinance your existing loan if there is a significant reduction in either the interest rate, monthly payment, or total interest costs.

There is no set rule for how long you should keep a car before refinancing. It depends on your financial situation and goals.

If you've experienced a significant improvement in your credit score, interest rates have dropped, or your financial needs have changed, refinancing may be a good option regardless of how long you've had the car.

Whether it's better to refinance a car or pay it off early depends on your financial situation and goals. If you can afford to make larger monthly payments, paying off your car loan early can save you money on interest payments.

However, if you want to reduce your monthly payments or secure a lower interest rate, refinancing may be the better option.

Yes, refinancing a car will require a hard inquiry on your credit report and temporarily lower your credit score by a few points to double digits. However, as long as you pay your payment on time until the maturity date, these repayment records will benefit your credit history and increase your credit score.

On this page Jump to