Calculate Auto Refinance
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Reviewed by Calculator Editorial Team
Refinancing your auto loan can help you save money by taking advantage of lower interest rates or better loan terms. Our auto refinance calculator helps you estimate your potential savings by comparing your current loan with a new refinance option.
How to Use This Calculator
To calculate your potential auto refinance savings, follow these steps:
- Enter your current loan balance in the "Current Loan Balance" field.
- Enter your current interest rate in the "Current Interest Rate" field.
- Enter the remaining term of your current loan in the "Current Loan Term" field.
- Enter your desired new interest rate in the "New Interest Rate" field.
- Enter your desired new loan term in the "New Loan Term" field.
- Click the "Calculate" button to see your estimated savings.
The calculator will display your estimated monthly payment for both your current loan and the new refinance option, along with the total interest paid and the total amount paid over the life of the loan.
Formula Used
The calculator uses the standard loan payment formula to calculate monthly payments:
Monthly Payment = P * (r(1 + r)^n) / ((1 + r)^n - 1)
Where:
- P = Principal loan amount
- r = Monthly interest rate (annual rate divided by 12)
- n = Number of payments (loan term in months)
The calculator then compares the total interest paid under both loan scenarios to determine your potential savings.
Worked Example
Let's say you have a $20,000 auto loan with a 5% interest rate and 48 months remaining. You want to refinance to a 3.5% interest rate with a 60-month term.
Using the calculator:
- Current monthly payment: $432.88
- New monthly payment: $346.44
- Total interest paid with current loan: $2,400
- Total interest paid with new loan: $1,800
- Total savings: $600
In this example, refinancing saves you $600 in interest over the life of the loan.
Benefits of Auto Refinancing
Refinancing your auto loan can offer several advantages:
- Lower interest rates: You can take advantage of current low interest rates to reduce your monthly payments.
- Shorter loan terms: Refinancing to a shorter term can help you pay off your loan faster and save on interest.
- Cash-out options: Some refinancing options allow you to access equity in your vehicle as cash.
- Improved credit: If you've improved your credit score since taking out your original loan, you may qualify for better terms.
Before refinancing, make sure you understand the costs and requirements of the new loan. Some refinancing options may have fees or require a good credit score.
Best Time to Refinance
The best time to refinance your auto loan depends on several factors:
- Interest rate trends: Refinance when interest rates are lower than your current rate.
- Loan term: Consider refinancing to a shorter term if you want to pay off your loan faster.
- Credit score: Refinance when your credit score has improved since taking out your original loan.
- Vehicle value: Make sure your vehicle is still worth enough to secure the new loan.
It's generally a good idea to wait at least 6-12 months after purchasing your vehicle before refinancing, as interest rates tend to be higher in the first few years of ownership.