When does refinancing an auto loan make sense?

Refinancing replaces your current auto loan with a new one — ideally at a lower interest rate, a shorter term, or both. The most common reason people refinance is that their credit score has improved since they first got the loan, which makes them eligible for better rates.

Watch for term extension traps

A lower monthly payment sounds good, but if you extend your term significantly (say, from 24 months left to a new 60-month loan), you'll likely pay more total interest even at a lower rate. This calculator shows total interest for both scenarios so you can see the full picture, not just the monthly payment difference.

The break-even point

If refinancing has upfront fees, the break-even point tells you how many months it takes for your monthly savings to cover those fees. If you plan to keep the car longer than that, refinancing comes out ahead financially.