Auto Refinance Calculator

Refinancing a car loan swaps your existing loan for a new one, usually to capture a lower rate after your credit has improved or market rates have fallen. Because auto refinances often have little or no closing cost, the savings can begin immediately, which makes the decision simpler than a mortgage refinance.

Before you commit, check how this payment affects your debt-to-income ratio.

This calculator rebuilds both loans and puts them side by side: the calculated monthly payment on each, the total you'll pay on each, and, using your discount rate, what each payment stream costs in today's dollars. The data table and charts break both loans down year by year or month by month, so you can see exactly where the savings come from.

How does this calculator work?

Start with the loan you have: enter the original loan amount, its length, the interest rate, and how many years are left. You don't type in your current balance, as the calculator amortizes the original loan forward and derives the payoff balance for you. It appears in the highlighted line beneath the results, and the current loan's calculated Monthly Payment shows right in the form.

Then describe the refinance: the new term and rate, any down payment, and any refinance expenses. Expenses are rolled into the new loan rather than paid out of pocket, so the amount refinanced is your payoff balance plus expenses minus the down payment. The down payment itself still counts as part of the new loan's first-year cost in the totals, table, and charts. That’s because the cash you put in is still money the refinance path costs you.

The results show each loan's Total Loan Payments and PV of Loan Payments side by side. Next, a data table you can flip between yearly and monthly views (with a totals row), and four charts: Loan Balance, Interest Payments, Total Loan Payments, and PV of Total Loan Payments.

Auto refinances often have little or no closing cost, so savings can start immediately.

Watch the total interest, not just the payment, since extending the term can lower the monthly amount while raising lifetime cost.

What is the present value of total loan payments?

A dollar you pay four years from now doesn't cost you as much as a dollar you pay today, because money you keep in the meantime can earn a return. The Discount Rate field is that assumed return, and the calculator uses it to convert every future loan payment into today's dollars. Each year's payments are divided by (1 + discount rate) once for every year they sit in the future (this year's payments count at full value), and the running sum is the present value (PV) of total loan payments. It appears for both loans in the results above the data table and is charted year by year in the PV of Total Loan Payments tab.

For example, at a 5% discount rate, $5,636.40 of payments made in a loan's fourth year is worth $5,636.40 ÷ 1.05³ = $4,868.93 today. The further out a payment sits, the less it costs you in present-value terms.

This matters most when the two loans have different terms. Total payments treat a dollar due in year six the same as a dollar due next month, which can make a longer refinance look worse than it really is, or a shorter one look better. Present value puts both payment streams on the same footing, so it's the fairest single number for judging whether a refinance genuinely lowers the cost of your debt: if the new loan's PV is below the current loan's, you come out ahead in today's dollars.

Worked example

You owe $20,000 with 4 years left at 9%, and can refinance to 6% over the same 4 years at no cost. Assume a 5% discount rate: the return you figure your money could earn elsewhere. To model this here, enter an original loan of $20,000 over 4 years at 9% with 4 years left (a loan just taken out, so the payoff balance is the full $20,000), then a new 4-year loan at 6% with no down payment or expenses.

Current payment

$497.70

New payment (6%, 4 yr)

$469.70

Monthly savings

$28.00

Total interest saved

$1,344.01

PV of current payments (5% discount)

$22,236.76

PV of new payments

$20,985.74

PV savings, in today's dollars

$1,251.02

How the numbers work

At 9%, the current $20,000 balance over its remaining 4 years costs $497.70 a month. Refinancing the same balance and the same 4-year term at 6% drops the payment to $469.70, a $28.00 monthly saving.

Keeping the term identical is what makes this pure savings: the rate falls but the payoff date doesn't move out. Over the remaining 48 months that $28.00 adds up to $1,344, and because auto refinances often carry no closing costs, every dollar of it is kept.

Keeping the same 4-year term but cutting the rate from 9% to 6% saves $28.00 a month and $1,344 in interest, all of it real savings because there were no closing costs.

The trap is re-extending the term: refinancing $20,000 into a fresh 5- or 6-year loan would lower the payment more but could erase the interest savings entirely.

The present-value figures run the same comparison in today's dollars. The current loan costs $5,972.40 a year; discounting each year at 5% (this year at full value, next year ÷ 1.05, and so on) gives a PV of $22,236.76. The new loan's $5,636.40 a year discounts to $20,985.74. So the refinance is $1,251.02 cheaper in present-value terms: a little less than the nominal interest saved, because those savings trickle in over four years and later dollars count for less today.

When auto refinancing makes sense

The best candidates are borrowers with a credit score that's risen since the original loan, or who financed at a dealer markup and can now qualify for a lower bank or credit-union rate. Because auto loans are short and costs are low, even a one- to two-point rate drop can be worth it without a long break-even calculation.

Two cautions: keep the term equal to or shorter than what remains so you don't trade rate savings for a longer payoff, and be sure you're not pushing the loan past the point where you owe more than the car is worth. Compare lifetime interest, not just the monthly payment.