Skip to main content

How to Refinance a Car Loan

(updated June 27th, 2013)

When interest rates drop, refinancing your car loan could save you thousands of dollars.

Say you bought a new car two years ago and there were a few dings on your credit. You might have been charged 9 percent on a five-year loan for a $23,000 car. Your payments are probably about $525 a month.

Now let's say your credit has improved, and so have interest rates on car loans. You could now refinance the balance of your car loan at 3 percent and lower your payments to about $445 a month for the remaining three years. That's a savings of $80 a month and $2,880 over the life of the loan.

Most people don't realize how easy it is to refinance a car loan and how much money they can save by doing so.

Most people don't realize how easy it is to refinance a car loan and how much money they can save by doing so.

Other examples could be even more dramatic. In some cases, an uninformed used-car buyer might have saddled himself with a car loan that has an 18 percent interest. By refinancing at a competitive rate, he could slash his monthly payments in half.

Is there a downside to all this? No. That's because, unlike home mortgages, many auto loans don't charge prepayment penalties or fees to set up the loan. And consumers can complete the application process online in about 15 minutes.

See Edmunds pricing data

Has Your Car's Value Changed?

Used car values are constantly changing. Edmunds lets you track your vehicle's value over time so you can decide when to sell or trade in.

Price history graph example

Car owners who are thinking about refinancing their auto loans should first locate their purchase contracts and check their term (the length of the loan), the balance (how much they still owe) and the current interest rate. This is especially easy for car owners who have their accounts online.

Many lenders offer auto refinancing. Start by checking the refinancing rates offered by your own bank or credit union. Compare your results to rates listed for online lenders and other banks on a site such as

On, type in the name of your state and the closest city, and the site shows a list of lenders and their rates. Be sure to review the term of the loans, since different terms have different rates. Also, be aware that many of these lenders will run a credit check when you apply, which could have a minor impact on your credit score.

Remember, as interest rates drop, auto loan rates follow. Why throw that money away by paying unnecessary interest? Visit the auto loan calculator and see how much getting a new loan at a lower interest rate could save you.

Featured new car releases

The 100% Electric BMW iX.

Discover the unprecedented power of the BMW iX.