Auto Loan Refinance Calculator

How Auto Refinancing Calculations Work

Refinancing an auto loan replaces your current loan with a new one at a (hopefully) lower interest rate or different term. The key calculation is whether the interest savings exceed any fees and offset the cost of extending your loan term.

Monthly payment formula:

M = P × [r(1+r)^n] ÷ [(1+r)^n − 1]

Where P = remaining loan balance, r = new monthly rate, n = new term in months.

Worked example:

Current loan:

• Remaining balance: $18,000
• Current rate: 8.9% APR → monthly rate: 0.7417%
• Remaining term: 36 months
• Current payment: $572/month

New refinanced loan:

• Same balance: $18,000
• New rate: 5.9% APR → monthly rate: 0.4917%
• New term: 36 months

New payment = 18,000 × [0.004917 × (1.004917)^36] ÷ [(1.004917)^36 − 1] New payment ≈ $547/month

Monthly savings: $572 − $547 = $25/month

Total savings over 36 months: $25 × 36 = $900

Break-even calculation:

If there are refinancing fees (title transfer, lender fees): typically $150–$300.

Break-even months = Total fees ÷ Monthly savings = $200 ÷ $25 = 8 months

The refinance pays for itself after 8 months.

When NOT to refinance:

• Your current loan has a prepayment penalty that exceeds savings
• Extending the term reduces monthly payments but increases total interest paid significantly
• Your car’s value is less than the loan balance (underwater) — lenders may decline
• You plan to pay off the loan very soon — break-even won’t be reached

Best auto refinance timing: within the first 2 years of the original loan, before most interest has already been paid.