Auto Loan Refinance Calculator

• Compares the current loan with a refinance on payment, total interest, fees and total cost, with a side-by-side grid.
• Finds the break-even month: when the savings have paid back the refinance costs, counting the balance still owed.
• Warns when a longer term lowers your payment but raises what you pay overall, and when you owe more than the car is worth.
• Charts the balance of each loan over time and splits total cost into principal, interest and fees.

How to use this calculator

Look at your latest loan statement for the payoff balance, the interest rate (APR) and the number of payments left. Then enter the offer you are considering: the new APR, the new loan term and the fees. The default new term is the same as your remaining months, which isolates the effect of the lower rate. Pick a longer or shorter term to see how the term changes the result.

Under Advanced you can enter the car's current value for a loan-to-value check, any payoff or prepayment fee on the old loan, and whether the fees would be rolled into the new loan instead of paid at closing. If you do not know the value, leave it at its default or set it to 0 to skip that check.

This tool starts from a loan you already have. To price a new car loan, use the Auto Loan Calculator, and to see whether to refinance a mortgage see the Refinance Break-Even Calculator.

When refinancing a car loan makes sense

A refinance replaces your loan with a new one, usually from a different lender, which pays off the old one. It is worth considering when one of these has changed since you took the loan: market rates have fallen, your credit score has improved, or you took a dealer-arranged loan at a higher rate than you could have found yourself. It can also make sense to refinance to lower a payment that has become hard to carry, if you understand what that costs in total.

It tends to work best early in a loan, when the balance is large and most of each payment is interest, and when you have positive equity. Many lenders set limits on the vehicle's age and mileage, set a minimum balance, and will not lend more than the car is worth. These are lender practices rather than rules, so the offer you get is the only real test. Check for a prepayment penalty on your current loan, which most auto loans do not have but some do.

Shop with a fixed date in mind. Lenders that offer a pre-qualification with a soft credit check let you see a likely rate without affecting your score, though a formal application usually involves a hard inquiry. Several applications for the same type of loan within a short window are commonly counted together by scoring models, but the window varies by model, so do your comparing in one or two weeks rather than spread over months. Ask each lender for the APR, the term, every fee and the payment, and enter each offer here in turn. The one with the highest net savings and a break-even you are sure to reach is the better choice, not the one with the lowest advertised rate.

How the numbers are worked out

For a fixed-rate loan with level monthly payments, the payment is set by the balance, the monthly rate (APR divided by 12) and the number of payments:

Payment = Balance x i / (1 - (1 + i)^-n)    where i = APR / 12, n = months
Total cost = Payments over the life of the loan + fees paid in cash
Net savings = Total cost of keeping - Total cost of refinancing

For the default case, $24,000 at 8.5% with 48 months left costs $591.56 a month and $28,395 in total. A refinance at 6.5% for the same 48 months costs $569.16 a month. Total interest falls by $1,075. After the $200 of new-loan fees, the net saving is $875, and the payment falls by $22.40 a month.

Interest saved and net savings are different numbers. Interest saved ignores fees. Net savings, the headline, includes them, so it is the one that tells you whether refinancing paid off.

The balance chart shows the same story visually. When the term is unchanged, the refinanced balance runs just below the current one all the way down and both reach zero together. When you extend the term, the refinanced line sits above the current line for the second half of the loan and reaches zero later. Where the lines are far apart, you are paying interest for longer on money you would otherwise have cleared. The comparison table below the charts lists the two balances every twelve months, with the amount the refinance is ahead or behind after fees.

The trap of a longer term

The easiest way to lower a car payment is to stretch the loan. Take the default loan and refinance it over 72 months instead of 48: the payment drops from $591.56 to $403.44, a saving of $188.12 a month. That looks like a win until you add up the 24 extra months. You would pay $653 more interest than if you kept the current loan, and after fees the refinance costs you $853 over the life of the loan. The calculator flags this with a warning whenever a longer term raises your total cost.

A moderate extension can still work if the rate cut is big enough. Over 60 months at the same 6.5%, the payment is $469.59 and net savings are $20, barely positive. Going the other way, a 36-month term raises the payment to $735.58 but saves $1,714, because you pay interest for a year less.

The third column in the comparison grid, shown when you change the term, applies the new rate to your remaining months. It separates how much of any saving comes from the lower rate and how much from simply borrowing for longer.

Break-even, fees and negative equity

The usual shortcut for break-even is the fees divided by the monthly payment saving. This calculator uses a stricter test. It adds up what you would have paid and what you would still owe under each option, month by month, and finds the first month from which the refinance stays ahead to the end of the loan. That way a lower payment that leaves a bigger balance does not count as a saving.

With the default numbers the break-even comes at month 6. The $200 of fees are recovered within half a year because the rate cut is large. Compare that with a $1,500 fee on the same loan: the refinance never gets ahead (-$425 net) and the calculator says so. With a smaller rate cut, to 8.0%, the saving falls to $71 and takes 25 months to break even. If you expect to sell or trade the car before break-even, refinancing loses money.

Rolling the fees into the loan avoids cash at closing but you pay interest on them. In the default case the net saving falls from $875 to $848.

Negative equity means you owe more than the car is worth. If the car is valued at $20,000 against the $24,000 balance, the loan-to-value is 120%. Many lenders will not refinance in that position, or will charge more. The calculator shows a warning and the equity figure when the new loan is higher than the vehicle value you enter. Paying the balance down, or waiting, usually helps more than shopping for a lower rate.

Assumptions and limitations

• Fixed rate, level payments. The calculator assumes a simple-interest fixed-rate loan with equal monthly payments. Loans with precomputed interest, balloon payments or variable rates are not modelled.
• Current payment is calculated. It comes from your balance, rate and months left, so it may differ slightly from your statement if the lender rounds or if payments have been late.
• No extra payments. Paying more than required on either loan would change the results.
• No time value of money. Savings are added up in plain dollars, with no discounting.
• Fees are what you enter. Add new-loan fees, title and registration costs and any payoff fee. Lenders differ.
• Approval is not assessed. The rate you are offered depends on your credit, income and the car's age and mileage.
• Insurance and gap coverage. A new lender may require different coverage. Any cost is not included.

Common mistakes

Judging by the payment alone. A lower payment on a longer loan can cost more in total. Look at net savings and total interest too.

Ignoring the fees. A small rate cut on a small balance may not cover title, registration and lender fees.

Refinancing late in the loan. With few payments left, most of the interest is already paid and there is little left to save.

Using the wrong balance. Use the payoff amount from your lender, not the original loan amount or last month's balance.

Rolling in negative equity. Adding what you owe above the car's value to a new loan keeps you underwater for longer.

Frequently asked questions