Auto Loan Refinance Savings Calculator
Should You Refinance Your Auto Loan?
Refinancing a car loan means taking out a new loan with different terms—usually a lower interest rate—to pay off your current vehicle loan. If interest rates have dropped since you first bought your car, or if your credit score has improved significantly, you could save thousands of dollars over the life of the loan.
How This Calculator Works
This auto loan refinance calculator compares your current monthly obligation against a hypothetical new loan. To use it, you'll need your current remaining balance and the remaining months on your current contract. We use the standard amortization formula to calculate the "cost of money" for both scenarios.
Example Scenario:
Imagine you have a $20,000 balance remaining on a loan at 8% interest with 36 months left. Your current payment is roughly $626. If you refinance that $20,000 into a new 36-month loan at 4% interest, your new payment drops to $590. That is a savings of $36 per month and over $1,300 in total interest savings.
Key Factors to Consider
- Credit Score: A higher score usually qualifies you for the lowest rates displayed in this calculator.
- Loan-to-Value (LTV): If you owe more than the car is worth ("upside down"), it may be harder to find a lender willing to refinance.
- Prepayment Penalties: Check if your current lender charges a fee for paying off the loan early.
- The Term Length: Extending your term (e.g., going from 24 months remaining to a new 48-month loan) will lower your monthly payment but might increase the total interest you pay.
Frequently Asked Questions
Does refinancing hurt my credit?
Applying for a refinance will trigger a "hard inquiry," which might cause a temporary dip of a few points. However, consistently making lower payments on time will benefit your score in the long run.
When is the best time to refinance?
Generally, once you have at least 6 to 12 months of on-time payments on your original loan and market interest rates have decreased, it is a great time to check your options.