# Will an auto refinance save money?

Compares your current car loan with a refinanced loan: the new monthly payment, the interest on each, the total saving after fees, and the break-even month.

- Page: https://www.acalculator.org/finance/auto-refinance-calculator
- JSON spec: https://www.acalculator.org/finance/auto-refinance-calculator.json
- Version: 81dcc07a7bec

## Default answer

Example with the default inputs (Loan balance today $25,000.00, Current APR 9%, Months left on your loan 48, New APR 6%, New loan length (months) 48, Refinance fees $0.00, Add the fees to the new loan No): Refinancing $25,000.00 at 6% over 48 months makes your payment $587.13 (now $622.13), a total saving of $1,680.02.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| balance | Loan balance today | What you still owe on your car loan (the payoff amount). |
| rate | Current APR | The yearly interest rate of your current loan. The monthly rate is this divided by 12. |
| left | Months left on your loan | How many monthly payments your current loan has left. |
| newrate | New APR | The yearly interest rate of the new loan. |
| newterm | New loan length (months) | The number of monthly payments on the new loan. |
| fees | Refinance fees | Fees to refinance, such as a lender fee, title transfer, or a prepayment penalty on the old loan. |
| roll | Add the fees to the new loan | When on, the fees are borrowed in the new loan. When off, you pay them up front. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| newPayment | Your new monthly payment | The level monthly payment of the new loan. |
| oldPayment | Your current monthly payment | The level payment that clears today’s balance at the current APR in the months left. |
| monthly | Monthly saving | The current payment minus the new payment. Below zero, the new payment is higher. |
| oldInterest | Interest if you keep your loan | All the interest left on the current loan. |
| newInterest | Interest on the new loan | All the interest on the new loan. |
| oldTotal | Total cost if you keep your loan | Every payment left on the current loan. |
| newTotal | Total cost if you refinance | Every payment on the new loan plus any fees paid up front. |
| saving | Total saving | The total cost of keeping your loan minus the total cost of refinancing. Below zero, refinancing costs more. |
| breakEven | Fees paid back after | The months of lower payments it takes to repay fees paid up front: fees ÷ monthly saving, rounded up. Shown when both are above zero and it is within the new loan’s length. |

## Method

payment = L × r ÷ (1 − (1 + r)^−n) for each loan, with r = APR ÷ 12; each month interest = balance × r; saving = every payment left on the current loan − (every new payment + fees paid up front).

## Assumptions

- Your current loan is on schedule: its payment is the level payment that clears today’s balance in the months left.
- Both loans have fixed rates, monthly payments at the end of each month, and interest at APR ÷ 12.
- The last payment of each loan clears whatever is left.
- Fees are either paid up front or added to the new loan balance.
- This is an estimate, not financial advice. Check the lender’s disclosures for the actual APR and fees.

## Worked examples

1. balance = $20,000.00, rate = 4.75%, left = 72, newrate = 4.75%, newterm = 36 gives oldPayment = $319.78, oldInterest = $3,024.48, newPayment = $597.18, newInterest = $1,498.32. Source: CFPB, How do I compare auto loan offers? ($20,000 at 4.75%: $320 and $3,024 over six years, $597 and $1,498 over three years); full values by hand in content.mdx.
2. balance = $15,000.00, rate = 12%, left = 36, newrate = 6%, newterm = 36, fees = $300.00, roll = no gives oldPayment = $498.21, newPayment = $456.33, monthly = $41.89, breakEven = 8. Source: hand calculation in content.mdx: 300 ÷ 41.89 = 7.2, rounded up to 8 months.
3. balance = $10,000.00, rate = 0%, left = 20, newrate = 0%, newterm = 40, fees = $200.00, roll = yes gives oldPayment = $500.00, newPayment = $255.00, oldTotal = $10,000.00, newTotal = $10,200.00, saving = -$200.00. Source: hand calculation in content.mdx: 0% loans divide evenly; the $200 fee is borrowed.

## FAQ

### When does refinancing a car loan save money?

When the new loan costs less in total: every payment left on your current loan, compared with every payment on the new loan plus any fees. A lower rate usually helps. A longer loan lowers the monthly payment but can cost more in total, because you pay interest for more months.

### Why can a lower payment cost more overall?

Stretching the loan over more months lowers each payment but adds months of interest. The CFPB’s example: $20,000 at 4.75% costs $1,498 in interest over three years, but $3,024 over six years, more than twice as much.

### What fees should I include?

Include anything you pay to refinance: a lender or origination fee, title and registration transfer fees, and any prepayment penalty on your current loan. Check your current loan agreement for a prepayment penalty, and the new lender’s disclosures for the APR and fees.

### What is the break-even point?

If you pay fees up front, it is how many months of lower payments it takes to earn them back: fees ÷ monthly saving, rounded up. With $300 of fees and a $41.89 monthly saving, that is 8 months. If you sell the car or pay the loan off before then, the refinance cost more than it saved.

### How is my current payment worked out?

From what you owe, your current APR, and the months left: it is the level payment that clears the balance on time. If you have been paying extra, your real payment may be different, and so may the months left.

### Does refinancing affect my credit?

Applying for a new loan usually means a credit check, and opening the new loan changes your credit history. Rate shopping for the same kind of loan within a short period is often treated as a single inquiry. The calculator does not include credit effects.

## Sources

- Consumer Financial Protection Bureau, How do I compare auto loan offers? What should I look at besides the monthly payment? https://www.consumerfinance.gov/ask-cfpb/how-do-i-compare-auto-loan-offers-what-should-i-look-at-besides-the-monthly-payment-en-753/
- Consumer Financial Protection Bureau, Should I refinance? (handout). https://files.consumerfinance.gov/f/documents/cfpb_should_i_refinance_handout.pdf
- Consumer Financial Protection Bureau, Auto loans. https://www.consumerfinance.gov/consumer-tools/auto-loans/