Monthly Savings: $0.00
Total Interest Saved: $0.00
Understanding Car Loan Refinancing
Car loan refinancing is the process of replacing your existing car loan with a new one that has different terms. This can be a strategic financial move, especially if interest rates have dropped since you took out your original loan, or if your credit score has improved. The primary goal of refinancing is often to secure a lower interest rate, reduce your monthly payments, or shorten the loan term to pay off your car faster.
How the Calculator Works
This calculator helps you estimate the potential savings from refinancing your car loan. It uses the following formulas:
Monthly Payment Calculation (Amortization Formula):
The standard formula to calculate the monthly payment (M) for a loan is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P = Principal loan amount
i = Monthly interest rate (Annual rate / 12)
n = Total number of payments (Loan term in months)
Total Interest Paid:
Total Interest = (Monthly Payment * Number of Months) – Principal Loan Amount
Savings Calculation:
The calculator computes the monthly payment and total interest for both your current loan and the proposed new loan. The difference in monthly payments represents your potential monthly savings, and the difference in total interest paid represents your total interest savings over the life of the new loan.
When Should You Consider Refinancing?
Lower Interest Rates: If market interest rates have fallen significantly since you obtained your original loan, you might qualify for a lower Annual Percentage Rate (APR).
Improved Credit Score: A higher credit score can help you qualify for better interest rates and loan terms.
Change in Financial Situation: If you need to lower your monthly payments to ease your budget, refinancing to a longer term might be an option (though this may increase total interest paid). Conversely, if you can afford more, refinancing to a shorter term can help you pay off the loan faster and save on interest.
Negative Equity: In some cases, refinancing might help if you owe more on your car than it's currently worth (though lenders may be hesitant to approve this).
Important Considerations:
Fees: Be aware of any origination fees, title transfer fees, or other costs associated with refinancing, as these can offset potential savings.
Loan Term: Extending your loan term will lower your monthly payments but likely increase the total interest you pay over time.
Credit Score Impact: Applying for a new loan involves a hard credit inquiry, which can temporarily lower your credit score.
Use this calculator as a starting point to explore your refinancing options and make an informed financial decision.
function calculateMonthlyPayment(principal, annualRate, termMonths) {
if (principal <= 0 || annualRate < 0 || termMonths <= 0) {
return 0;
}
var monthlyRate = annualRate / 100 / 12;
var n = termMonths;
var principalValue = principal;
var numerator = principalValue * monthlyRate * Math.pow(1 + monthlyRate, n);
var denominator = Math.pow(1 + monthlyRate, n) – 1;
if (denominator === 0) return 0; // Avoid division by zero
var monthlyPayment = numerator / denominator;
return isNaN(monthlyPayment) ? 0 : monthlyPayment;
}
function calculateTotalInterest(principal, monthlyPayment, termMonths) {
if (monthlyPayment === 0 || termMonths <= 0) {
return 0;
}
var totalPaid = monthlyPayment * termMonths;
var totalInterest = totalPaid – principal;
return isNaN(totalInterest) ? 0 : totalInterest;
}
function calculateRefinance() {
var currentLoanBalance = parseFloat(document.getElementById("currentLoanBalance").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
var currentLoanTerm = parseInt(document.getElementById("currentLoanTerm").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var newLoanTerm = parseInt(document.getElementById("newLoanTerm").value);
var resultDiv = document.getElementById("result");
var monthlySavingsSpan = resultDiv.getElementsByTagName("span")[0];
var totalInterestSavingsSpan = resultDiv.getElementsByTagName("span")[1];
// Input validation
if (isNaN(currentLoanBalance) || currentLoanBalance <= 0 ||
isNaN(currentInterestRate) || currentInterestRate < 0 ||
isNaN(currentLoanTerm) || currentLoanTerm <= 0 ||
isNaN(newInterestRate) || newInterestRate < 0 ||
isNaN(newLoanTerm) || newLoanTerm <= 0) {
monthlySavingsSpan.textContent = "$0.00";
totalInterestSavingsSpan.textContent = "$0.00";
return;
}
// Calculate current loan details
var currentMonthlyPayment = calculateMonthlyPayment(currentLoanBalance, currentInterestRate, currentLoanTerm);
var currentTotalInterest = calculateTotalInterest(currentLoanBalance, currentMonthlyPayment, currentLoanTerm);
// Calculate new loan details
var newMonthlyPayment = calculateMonthlyPayment(currentLoanBalance, newInterestRate, newLoanTerm);
var newTotalInterest = calculateTotalInterest(currentLoanBalance, newMonthlyPayment, newLoanTerm);
// Calculate savings
var monthlySavings = currentMonthlyPayment – newMonthlyPayment;
var totalInterestSaved = currentTotalInterest – newTotalInterest;
// Display results
monthlySavingsSpan.textContent = "$" + (monthlySavings < 0 ? "0.00" : monthlySavings.toFixed(2));
totalInterestSavingsSpan.textContent = "$" + (totalInterestSaved < 0 ? "0.00" : totalInterestSaved.toFixed(2));
}