Auto Refinance Calculator: How Much Will You Actually Save?
See how much money you can save using this car loan refinancing calculator.
Auto Refinance Calculator
This calculator provides an estimate of your car payment but accuracy is not guaranteed and may not reflect all fees and taxes.
If you are looking to determine your monthly payment for a brand new auto loan, use this calculator instead.
Why It Might Be Time To Refinance
Refinancing swaps your existing car loan for a new one at a lower rate. The balance you owe does not change. What you pay to carry it does.
The single most common reason people are overpaying is dealer financing. The finance office can mark up the rate the lender approved you for and keep the spread, which is legal and rarely disclosed. If you signed the dealer's paperwork without comparing an outside offer first, you may be carrying that markup on every payment.
The other two triggers are simpler. Market rates have fallen since you signed, or your credit score has climbed. Either one can put you in a better tier than the one you were priced into.
How Much Can You Save by Refinancing Your Car Loan?
Take a $25,000 car financed for 60 months at 7%. The payment is $495 and you pay $29,702 by the end. Refinance the remaining $21,000 in year two at 5% and the payment drops to $484 over the last 48 months.
Count the 12 payments you already made at the old rate and the refinanced path costs $29,154, against $29,702 if you had left it alone. Real saving: about $548.
That is smaller than most refinancing pitches suggest, and it is the honest number. The saving grows fast when the rate gap is wider or you refinance earlier. Drop a 7% loan to 4% with $15,000 left over 48 months and you keep $984. Run your own figures in the calculator above rather than trusting a rule of thumb.
When Does Refinancing Your Car Loan Make Sense?
Here are three reasons it may be time to refinance.
Reason 1 - If Interest Rates Have Dropped
Interest rates are always changing. So keep an eye on rates and you may be able to save some money.
A good rule of thumb is if rates have dropped 2% or more and you have at least $10,000 outstanding, then refinancing is worth considering.
Reason 2 – If You Have a High Interest Loan
If you didn’t get a financing deal with a low APR when you bought your car you may be paying a higher interest rate than the average car buyer.
Reason 3 - If You Have Improved Your Credit
Auto lenders use your credit score to determine your interest rate. If you had a poor credit score or bought a car as a student with no prior credit history your loan payments may be inflated.
If you’ve improved your credit and have been making your car payments on time, you may now qualify for a lower rate.
Where Can You Refinance?
Not all lenders offer auto refinancing. However, one of my sponsors, SuperMoney, pulls together offers from those lenders that do.
They present offers from several different online lenders and you can check rates and pick the best offer.
When Shouldn’t You Refinance?
Refinancing a car loan may not always be a good idea. You may want to hold off for these reasons.
Reason 1 - If You Are Towards the End of Your Loan
If you’ve paid off most of your car already there is less value in refinancing. Loan payments usually contain a higher portion of interest earlier in the life of the loan. As you get towards the end of the loan your payment will mostly be principal. As a result, you won’t be able to save as much on interest if you refi towards the end of your loan.
A good rule of thumb is to skip refinancing if you have less than 2 years left on your loan.
Reason 2 - If Your Car Has High Mileage
Some auto lenders will only allow refinancing if your car is less than 7 years old or hasn’t exceeded a mileage cap (likely around 100,000 miles or so). This is because the loan is secured by an asset (your vehicle) that can be repossessed if you don’t pay. The more your car has depreciated, the lower the value of the asset needed to secure the loan.
Reason 3 - If You Will Incur Fees
Occasionally, car loans have prepayment penalties for paying them off early. If that is the case, read the fine print as the fees may exceed any interest savings.
Some lenders may also charge you fees to refinance. So again, you’ll want to evaluate any fees against the amount you will save.
