How much can I save by refinancing my car loan?
Each point off your rate saves roughly the same amount, and it depends on your balance and the months left. On $18,000 with 48 months left at 9.5%, moving to 6.5% saves $25.35 a month and $1,067 overall. That's small enough that fees matter, so count them.
| New rate | New payment | Saved a month | Saved over the loan |
|---|---|---|---|
| 8.5% | $443.67 | $8.55 | $260 |
| 7.5% | $435.22 | $17.00 | $666 |
| 6.5% | $426.87 | $25.35 | $1,067 |
| 5.5% | $418.62 | $33.60 | $1,463 |
Savings also shrink with time. Interest on a car loan is largest at the start, so refinancing late in a loan has less left to save. A $9,000 balance with 24 months left, moving from 7% to 6.5% with $300 of fees, loses $251 overall even though the payment falls by $2.03.
Does refinancing a car loan for a longer term cost more?
It can, and this is the trap. A longer term always lowers the payment, so a refinance can feel like a win while costing you more. Look at this: at 8.5% for 84 months, the payment is $285.06, which is $167.16 less than today, but you'd pay $2,388 more in total, even with a lower rate.
| New term | Payment | Saved a month | Total interest | Saved over the loan |
|---|---|---|---|---|
| 36 months | $551.68 | -$99.46 | $1,861 | $1,696 |
| 48 months | $426.87 | $25.35 | $2,490 | $1,067 |
| 60 months | $352.19 | $100.03 | $3,131 | $425 |
| 72 months | $302.58 | $149.64 | $3,786 | -$229 |
| 84 months | $267.29 | $184.93 | $4,452 | -$896 |
The CFPB puts it plainly: a lower monthly payment doesn't necessarily mean a lower interest rate, and it might just mean you're paying for longer. A longer loan can also keep you owing more than the car is worth for longer.
There's a better way to use a lower rate. Take the new rate but keep paying your old $452. This example then finishes in 3 yrs 9 mos instead of 4 yrs and saves $1,228. Check that the new loan has no prepayment penalty, and you can still fall back to the lower required payment if money gets tight.
How long does it take to break even on an auto refinance?
In this example, $150 of fees are paid back in month 4. The usual shortcut, costs divided by monthly savings, says 6 months. It looks only at the lower payment, while this calculator compares the interest you've actually paid and what you'd still owe on each loan.
Net position = old loan paid + old balance − new loan paid − new balance − costs paid upfrontThe first month that number turns positive is your break-even. On a stretched loan, it can turn negative again later, because you keep paying interest after the old loan would have ended. The results show that as "Ahead only through month" so you know how long the advantage holds. If you can add the fees to the loan, you pay nothing today, but you pay interest on them: rolled in, this example saves $1,046 rather than $1,067.
Check your current contract too. The CFPB says your contract and state law decide whether you can pay off a car loan early, and a refinance pays off the old loan in full. A $300 penalty here cuts the savings to $767. You can enter it in the advanced options.
Can I refinance if I owe more than my car is worth?
A lender may say no or limit the amount, so check first. Owing $26,000 on a car worth $20,000 means $6,000 of negative equity. Refinancing it doesn't make that go away, and it can grow if you add fees or a longer term. The calculator warns you when your new loan would be more than the value you enter.
| Plan | New loan | Payment | Saved over the loan |
|---|---|---|---|
| 72 months | $26,150 | $471.37 | $763 |
| 60 months | $26,150 | $542.83 | $2,131 |
| 60 months, with $2,000 paid down first | $24,150 | $501.31 | $1,953 |
If that's where you are, the FTC's advice for negative equity applies here too: make extra principal-only payments if you can, and choose the shortest term you can afford. To model paying cash toward the loan, enter the lower balance as what you still owe. The savings figure then compares both loans at that lower balance, and it doesn't count your cash as a cost or a gain. If you can't afford the payment at all, call your lender early and ask what options you have.
How to compare auto refinance rates in 2026
This site doesn't list refinance rates, because they change and yours depends on your credit, your car, and the lender. Get written quotes for the same balance and term from several places, such as a bank, a credit union, and an online lender. Compare the payment, the APR, the total cost, and any fees.
Then enter each quote here, and use the APR calculator if a lender charges fees that the rate doesn't show. If paying the loan down faster is the better plan, the loan payoff calculator shows what extra payments would save without a new loan. A refinance mainly makes sense when the rate falls and the term doesn't stretch.
Common questions
When does refinancing a car loan make sense?
When the lower rate saves more than the fees and you don't add time. It helps most with a big balance, a large rate drop, and many months left. In this example, a drop of 3 percentage points saves $1,067 over 48 months.
Is it bad to refinance a car loan for a longer term?
Not always, but know what you're buying. If you need a lower payment to stay current, a longer term may be worth it, even if it costs more overall. Just compare the total. If you can pay more later, a loan without a prepayment penalty lets you do that.
Why doesn't my current payment match the calculator?
The calculator works out your payment from the balance, rate, and months left. If your statement shows something different, your months or balance may be off, or the loan may have fees or add-ons built in. Adjust the months until it matches for the closest comparison.
Should I use my balance or a payoff amount?
For the best estimate, ask your lender for a payoff amount. It can differ from your balance, since it may include interest through the payoff day, unpaid fees, and any prepayment penalty.
Should I add the refinance fees to the new loan?
Only if you need to. It means nothing out of pocket today, but you pay interest on the fees. In this example, adding $150 to the loan raises the payment from $426.87 to $430.43, and the savings go from $1,067 to $1,046.
Sources
- Can I prepay my loan at any time without penalty? · Consumer Financial Protection Bureau
- Take control of your auto loan · Consumer Financial Protection Bureau
- Should I trade in my car if it's not paid off? · Consumer Financial Protection Bureau
- Auto trade-ins and negative equity · Federal Trade Commission
- What is a payoff amount and is it the same as my current balance? · Consumer Financial Protection Bureau