Auto Loan Refinance Savings Calculator
How Auto Loan Refinancing Works
Auto loan refinancing means taking out a new car loan to pay off your existing one. The new loan typically has a different interest rate, monthly payment, and remaining term. This calculator compares your current loan against a proposed refinance to estimate how much you might save in monthly payments and total interest, and how long it takes to recover any refinance fees.
When you refinance, your new lender pays off the existing auto loan and you start making payments on the new loan instead. The main levers that change your costs are:
- Interest rate: A lower rate usually reduces both your monthly payment and total interest, all else equal.
- Remaining term vs. new term: Extending the term lowers the payment but can increase total interest paid; shortening the term does the opposite.
- Refinance fees: Lender fees and other closing costs can be added to the new balance or paid upfront, and they reduce your net savings until you pass the break-even point.
This tool focuses on fixed-rate, fully-amortizing auto loans (the most common type), where you pay the same amount every month until the balance reaches zero.
How We Calculate Your Payments and Savings
The calculator uses the standard amortization formula for fixed-payment loans to determine monthly payments and total interest for both your current loan and the refinance option.
Payment formula
For a loan with principal balance B, monthly interest rate r, and total number of payments n, the monthly payment P is:
Where:
- B = current principal balance (what you still owe)
- r = annual interest rate divided by 12 (for example, 6% becomes 0.06 / 12)
- n = number of monthly payments remaining
The calculator first uses this formula to estimate the monthly payment and remaining interest on your existing loan based on the balance, current interest rate, and months remaining that you enter.
Refinance calculations
Next, the tool calculates the new payment and total interest with your proposed refinance terms:
- Starting balance: It starts with your current loan balance and adds any refinance fees you enter. This prevents overstating savings by treating fees as part of the cost of the new loan.
- New payment: It applies the same amortization formula using the new rate and new term in months to find your new monthly payment.
- Total cost: It multiplies each monthly payment (current and new) by the number of months and subtracts the loan balance to estimate total interest over the remaining life of each loan, including fees in the refinance option.
- Monthly savings: It compares your current monthly payment to the new monthly payment.
- Total interest saved: It compares the remaining interest on your existing loan to the interest (plus any financed fees) on the refinance.
- Break-even point: If there are upfront or financed fees, the calculator estimates how many months of monthly savings you need for your cumulative savings to exceed those fees.
The optional refinance start date does not change the payment amounts. It is typically used only to align the schedule of payments or time-based charts with calendar dates, if shown.
How to Enter Your Information
- Current loan balance ($): Enter the payoff amount or the most recent principal balance shown on your statement.
- Current interest rate (%): Use the annual percentage rate (APR) for your existing loan. Enter it as a percentage like
7.5, not 0.075. - Months remaining on current loan: Enter how many scheduled payments you have left on your current loan.
- New refinance rate (%): Enter the quoted annual rate for the new loan as a percentage (for example, enter
5.9for 5.9%). - New loan term (months): Enter the length of the new loan in months (for example, 36 for three years, 60 for five years).
- Refinance fees ($): Include lender fees, title and registration fees, and any mandatory add-ons you expect to pay. If you are unsure, you can start with zero and adjust later.
- Refinance start date (optional): This may be used to line up the amortization schedule with calendar months but does not affect the payment amounts.
Interpreting the Results
Once you click to calculate, you will typically see several key outputs. Here is how to interpret them in practical terms:
- Monthly savings: If this number is positive, your refinance lowers your monthly payment compared with your current loan. If it is negative, the new payment is higher, which might still be acceptable if you are aggressively paying down the loan with a shorter term.
- Total interest saved: This compares the remaining interest on your current loan to the interest plus any financed fees on the new loan. A positive number suggests the refinance reduces your overall cost. A negative number means you would pay more total interest and fees by refinancing.
- Break-even period: If you pay fees to refinance, the break-even period tells you how many months you need to keep the new loan before your cumulative savings exceed those fees. If you expect to sell the car, trade it in, or refinance again before reaching break-even, the refinance may not be worthwhile.
- Remaining term comparison: Compare how many months you have left on your current loan to the new term. A much longer new term can make the payment look attractive while still increasing the total amount you pay over time.
Balancing these numbers is important. In some cases, the best option is not the one with the largest monthly savings, but the one that strikes the right trade-off between affordability today and minimizing total interest.
Worked Example
Consider a driver with the following situation:
- Current balance: $18,000
- Current rate: 8.0% APR
- Months remaining: 36
- Refinance rate: 5.5% APR
- New term: 36 months
- Refinance fees: $300 (financed into the new loan)
Step by step, the calculator will:
- Compute the current monthly payment and total remaining interest using the 8.0% rate and 36 remaining months.
- Add the $300 fee to the $18,000 balance for a new starting balance of $18,300.
- Calculate the new monthly payment at 5.5% over 36 months.
- Estimate the total interest on the new loan, then compare it to the interest remaining on the old loan.
- Report monthly savings, total interest saved, and how many months it takes for the savings to exceed the $300 fee.
In a scenario like this, you might see a smaller monthly payment, more than $1,000 in interest savings over the life of the loan, and a break-even period of under a year. However, if the new term were extended to 60 months instead of 36, the monthly payment might drop further but total interest could increase, even at a lower rate. The calculator helps you see that trade-off clearly.
When Refinancing Helps vs. When It May Not
| Situation | Refinancing often helps | Refinancing may not help |
|---|---|---|
| Interest rate change | Your credit has improved or market rates have dropped significantly since you took out the original loan. | Your current rate is already competitive and any new offer is only slightly lower after accounting for fees. |
| Loan term | You keep a similar or shorter term and lock in a lower rate, reducing both payment and total interest. | You stretch the term much longer, lowering the payment but increasing total interest over the life of the loan. |
| Remaining balance | You still owe a meaningful amount and have many payments left, so a lower rate has time to generate savings. | You are close to the end of your loan and most of the interest has already been paid. |
| Vehicle value | Your car’s value comfortably exceeds your loan balance, making approval easier and terms more favorable. | You are “upside down” (owe more than the car is worth), which can limit options or lead to higher costs. |
| Planned ownership time | You plan to keep the vehicle longer than the break-even period, so you can fully benefit from the savings. | You expect to sell or trade in the car before reaching break-even. |
Assumptions, Limitations, and Important Notes
- Fixed-rate loans only: The calculator assumes both your current loan and the refinance are fixed-rate, fully-amortizing loans with equal monthly payments. It does not model variable or balloon-payment structures.
- Interest compounding: Calculations assume interest accrues monthly based on the stated annual rate divided by 12.
- No late fees or extra charges: The tool does not include potential late fees, penalties, or optional add-on products unless you include them in the refinance fee field.
- Prepayment penalties: Some auto loans charge a fee if you pay them off early. If your current loan has a prepayment penalty, consider adding that amount to the refinance fees so the calculator can incorporate it.
- Taxes and insurance: Property tax, registration, and insurance costs are not included. The focus is strictly on the loan’s principal, interest, and specified fees.
- Start date usage: The refinance start date is treated as a scheduling aid only. It does not change the interest rate or the monthly payment amounts.
- Estimates only: Results are estimates based on the information you enter and standard amortization formulas. Actual lender offers, payment amounts, and savings may differ.
- Not financial advice: This calculator is a general educational tool and does not provide personalized financial, legal, or tax advice. Consider speaking with a qualified professional or your lender before making final decisions.
Practical Tips for Using Your Results
- Run multiple scenarios by changing the new rate and term to see how keeping the same term versus extending it affects both your monthly payment and total interest.
- Test different fee amounts to see how much fees reduce your savings and how they extend your break-even period.
- If your goal is to become debt-free faster, compare a shorter-term refinance with your current loan plus extra principal payments.
- If cash flow is tight, focus on monthly savings, but review the total interest numbers carefully so you understand the long-term trade-offs.
- Review your current loan agreement for prepayment penalties or other charges, and include them in the fees field if they apply.
By combining this calculator’s estimates with your own plans for how long you will keep the car, how stable your income is, and your other financial goals, you can decide whether refinancing your auto loan is likely to help or hurt in the long run.