How it works
Refinancing replaces your car loan with a new one, ideally at a lower rate. The calculator works out the payment on what you owe now under both loans, then compares everything you'd pay from here on: the rest of your current payments against the new payments plus any fees. It also shows how many months of savings it takes to pay back fees paid up front.
Saved over the loan = current payment × payments left − (new payment × new term + fees paid up front)
Worked example
You owe $20,000 at 9% with 48 payments left: $497.70 a month. Refinancing at 6% over the same 48 months, with $100 of fees, cuts the payment to $469.70. That's $28.00 a month and $1,244 in total, and the fees are paid back in 4 months.
Compare a smaller cut, to 8%, stretched to 72 months. The payment drops further, to $350.66, but you'd pay $1,358 more in total than keeping your loan.
When refinancing makes sense
- Rates have fallen, or your credit has improved since you took the loan, especially if you financed through a dealer at a high rate.
- Early in the loan. Interest is front-loaded, so there's more to save with years left than in the last few months.
- Keep the term. Matching the payments you have left keeps the saving real; a longer term mostly moves the cost later.
- Watch what you owe against the car's value. Cars lose value quickly, and lenders are cautious about lending more than a car is worth, which can make refinancing harder or pricier.
Things to know
- Check your current loan for a prepayment penalty before you switch. Most car loans don't have one, but some do.
- Shop within a short window. Rate checks for the same kind of loan close together are generally treated as one inquiry by credit scoring models.
- Add-ons. If you bought GAP coverage or a service contract with the old loan, ask whether it transfers or can be refunded.
- Buying a car instead? The car loan calculator compares terms on a new loan, and the car affordability calculator works out a budget.
Questions people ask
How soon can I refinance a car loan?
There's usually no fixed waiting period, but the new lender needs your current lender's lien recorded on the title, which can take a couple of months, and some want a few on-time payments first. The sooner you refinance a high-rate loan, the more there is to save.
Does refinancing hurt my credit?
Applying adds a hard inquiry, which usually lowers a score a little for a short time, and the new account lowers the average age of your accounts. Paying on time from then on matters far more.
What's a good car loan rate right now?
At banks the average on a 60-month new-car loan was 7.14% in 2026 Q2, according to the Federal Reserve. Used cars and lower credit scores usually mean higher rates.
Sources
- Consumer Financial Protection Bureau: auto loans
- Consumer Financial Protection Bureau: the difference between a loan interest rate and the APR
- Federal Reserve: consumer credit (G.19), terms of credit, released September 8, 2026
Reviewed September 29, 2026 by The Dollars World team. How we build and check our calculators · Our data and formulas. This is general information, not financial advice.