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How to Refinance an Auto Loan


Refinancing an auto loan is far easier than refinancing a mortgage, and it can save you thousands of dollars in interest. Consider refinancing your auto loan if:

  • interest rates have dropped since you bought your car
  • your credit score has improved (meaning you may qualify for a better rate)
  • you financed your car through a dealership (which usually means higher rates)


Difficulty: Easy

Time Required: Varies

Here's How:

  1. Review the terms of your existing auto loan. Before you start shopping for a new loan, you need to know where you stand with your current loan. Find out what you're paying in interest, how many months you have left on the loan, your current pay off amount and whether there's a pre-payment penalty in place.

  2. Determine if your car qualifies. While each bank has it's own qualification requirements, most banks will not refinance a vehicle that:

    • has less than $7,500 left on the loan
    • is more than seven years old
    • has 100,000 miles or more (some banks set the cap at 70,000)
    • is used commercially
    • has a salvage title

    You also won't have much luck refinancing a motorcycle or RV. Some banks even rule out certain vehicle makes.

  3. Compare rates. Call a few banks in your area to get a feel for where the interest rates are at. You can also use a site like bankrate.com to look up the national averages.

    Tip: Be sure to go by used car interest rates. When you refinance, that's the rate you're likely to pay, even if you have a new car loan now.

  4. Estimate how much a refinance will save you. You can use an online auto loan calculator to get the job done.

  5. Apply for an auto refinance loan. If refinancing still seems to make sense after running your calculations, it's time to dig into all of the details. Question the banks that you're considering about any fees that you'll be expected to pay. A small fee to transfer the title and re-register the vehicle is to be expected, but some banks may also tack on a processing fee. Also, ask if there is a pre-payment penalty built into the loan. You want to avoid this because it will penalize you for paying off your loan early.

    Once you've compared all of your options, submit your loan application to the bank with the best deal.

  6. Review your paperwork and finalize your loan. Then, walk around feeling smart because you saved a bunch of money.


  1. Most banks will only refinance auto loans from other banks, so don't be surprised if your current bank turns you down
  2. Avoid cash out refinance offers. They'll add to the length and cost of your loan

What You Need:

  • A copy of your current loan papers
  • Information about your vehicle – VIN and mileage
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