Refinancing a vehicle loan involves replacing your existing car loan with a new one, typically with different terms and interest rates. The primary goal of refinancing is often to secure a lower interest rate, reduce your monthly payments, or shorten the loan term. This calculator helps you estimate the potential financial impact of refinancing your current auto loan.
How the Calculation Works
The calculator determines the total interest paid under your current loan and compares it to the total interest paid under a new, refinanced loan. It then calculates the difference to show potential savings.
Key Inputs:
Current Loan Balance: The outstanding amount you still owe on your existing car loan.
Current Annual Interest Rate: The interest rate of your current loan, expressed as a percentage.
Current Remaining Term (Months): The number of months left to repay your existing loan.
New Proposed Interest Rate: The interest rate you anticipate securing with a refinanced loan.
New Proposed Loan Term (Months): The duration of the new loan, if you choose to refinance.
The calculator uses the standard loan payment formula to estimate the monthly payment and total interest for both the current and proposed new loans.
Monthly Payment Formula (for reference): M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment
P = Principal Loan Amount (Current Loan Balance)
i = Monthly Interest Rate (Annual Rate / 12 / 100)
n = Total Number of Payments (Loan Term in Months)
By calculating the total amount paid (Monthly Payment * Loan Term in Months) for both scenarios, we can determine the total interest paid and the potential savings.
When to Consider Refinancing:
Lower Interest Rates Available: If market interest rates have dropped or your credit score has improved significantly, you might qualify for a lower APR.
Shorter Loan Term: You might want to refinance to a shorter term to pay off your car faster and save on interest, even if the monthly payment increases slightly.
Longer Loan Term for Lower Payments: If you need to reduce your monthly expenses, you can refinance to a longer loan term, though this usually means paying more interest over time.
Negative Equity: In some cases, refinancing might help manage a situation where you owe more on the loan than the car is worth (though this is more complex and might involve "upside-down" loans).
Important Note: Refinancing may involve fees (e.g., origination fees, title transfer fees). This calculator focuses on the interest savings and does not include potential fees. Always factor in any associated costs when making a refinancing decision.
function calculateMonthlyPayment(principal, annualRate, termInMonths) {
var monthlyRate = (annualRate / 100) / 12;
var n = termInMonths;
var P = principal;
if (monthlyRate === 0) {
return P / n;
}
var numerator = monthlyRate * Math.pow(1 + monthlyRate, n);
var denominator = Math.pow(1 + monthlyRate, n) – 1;
var monthlyPayment = P * (numerator / denominator);
return monthlyPayment;
}
function calculateRefinance() {
var currentLoanBalance = parseFloat(document.getElementById("currentLoanBalance").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
var currentLoanTermMonths = parseFloat(document.getElementById("currentLoanTermMonths").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var newLoanTermMonths = parseFloat(document.getElementById("newLoanTermMonths").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = "; // Clear previous results
if (isNaN(currentLoanBalance) || isNaN(currentInterestRate) || isNaN(currentLoanTermMonths) ||
isNaN(newInterestRate) || isNaN(newLoanTermMonths) ||
currentLoanBalance <= 0 || currentLoanTermMonths <= 0 || newLoanTermMonths <= 0) {
resultDiv.innerHTML = 'Please enter valid positive numbers for all fields.';
return;
}
// Calculate current loan details
var currentMonthlyPayment = calculateMonthlyPayment(currentLoanBalance, currentInterestRate, currentLoanTermMonths);
var totalPaidCurrent = currentMonthlyPayment * currentLoanTermMonths;
var totalInterestCurrent = totalPaidCurrent – currentLoanBalance;
// Calculate new loan details
var newMonthlyPayment = calculateMonthlyPayment(currentLoanBalance, newInterestRate, newLoanTermMonths);
var totalPaidNew = newMonthlyPayment * newLoanTermMonths;
var totalInterestNew = totalPaidNew – currentLoanBalance;
// Calculate savings
var totalInterestSavings = totalInterestCurrent – totalInterestNew;
var monthlyPaymentDifference = currentMonthlyPayment – newMonthlyPayment;
var formattedCurrentMonthlyPayment = currentMonthlyPayment.toFixed(2);
var formattedTotalInterestCurrent = totalInterestCurrent.toFixed(2);
var formattedNewMonthlyPayment = newMonthlyPayment.toFixed(2);
var formattedTotalInterestNew = totalInterestNew.toFixed(2);
var formattedTotalInterestSavings = totalInterestSavings.toFixed(2);
var formattedMonthlyPaymentDifference = monthlyPaymentDifference.toFixed(2);
var savingsMessage = ";
var paymentChangeMessage = ";
if (totalInterestSavings >= 0) {
savingsMessage = `Total Interest Saved: $${formattedTotalInterestSavings}`;
} else {
savingsMessage = `Total Additional Interest Paid: $${(-totalInterestSavings).toFixed(2)}`;
}
if (monthlyPaymentDifference > 0) {
paymentChangeMessage = `Your monthly payment could decrease by $${formattedMonthlyPaymentDifference}.`;
} else if (monthlyPaymentDifference < 0) {
paymentChangeMessage = `Your monthly payment could increase by $${(-monthlyPaymentDifference).toFixed(2)}.`;
} else {
paymentChangeMessage = `Your monthly payment would remain the same.`;
}
resultDiv.innerHTML = `
Current Estimated Monthly Payment: $${formattedCurrentMonthlyPayment}
Current Total Interest Paid: $${formattedTotalInterestCurrent}
Refinanced Estimated Monthly Payment: $${formattedNewMonthlyPayment}
Refinanced Total Interest Paid: $${formattedTotalInterestNew}
${savingsMessage}
${paymentChangeMessage}
(Note: Does not include potential fees or changes in loan term duration beyond interest calculation.)
`;
}