Calculator Auto Loan 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. This calculator helps you estimate potential savings and understand the refinancing process.
How Auto Loan Refinancing Works
Auto loan refinancing involves replacing your existing auto loan with a new one that typically offers better terms. This can mean lower interest rates, shorter loan terms, or lower monthly payments.
Refinancing doesn't require you to trade in or sell your car. You simply apply for a new loan with a different lender, and the new lender pays off your existing loan.
Types of Auto Loan Refinancing
- Rate-and-term refinance: Get a lower interest rate and/or shorter loan term.
- Cash-out refinance: Take out more money than you owe to pay for home improvements or other expenses.
Benefits of Refinancing
- Lower monthly payments
- Reduced interest costs over the life of the loan
- Potential tax benefits
- Access to better loan terms
When to Refinance an Auto Loan
Consider refinancing your auto loan when you can secure a lower interest rate than what you're currently paying. Other factors to consider include:
- Your credit score has improved since you took out your original loan
- Interest rates have dropped significantly
- You want to pay off your loan faster
- You need cash to use for other purposes
Refinance Savings Formula:
Savings = (Original Interest Rate - New Interest Rate) × Loan Amount × Loan Term
Potential Downsides
- Closing costs and fees
- Potential impact on your credit score
- Risk of missing payments if you're not prepared
How to Calculate Auto Loan Refinance
To calculate potential savings from refinancing, you'll need to know:
- Your current loan balance
- Your current interest rate
- The new interest rate you're considering
- The loan term (how long you want to pay it off)
The calculator on this page will help you estimate your potential savings based on these factors.
Key Considerations
- Closing costs (fees for processing the new loan)
- Credit score impact
- Loan term implications
Example Calculation
Let's say you have an auto loan with a $20,000 balance at 8% interest. You're considering refinancing to a new loan at 5% interest over the same 5-year term.
| Factor | Original Loan | Refinanced Loan |
|---|---|---|
| Loan Amount | $20,000 | $20,000 |
| Interest Rate | 8% | 5% |
| Term | 5 years | 5 years |
| Monthly Payment | $389.81 | $332.25 |
| Total Interest Paid | $2,398.10 | $1,322.50 |
| Total Cost | $22,398.10 | $21,322.50 |
In this example, refinancing would save you $975.60 in interest over the life of the loan, with monthly payments reduced by $57.56.