Should I Refinance My Car Loan?

You may want to consider refinancing a car loan if you have an improved credit score, find better loan terms, or qualify for a lower interest rate.

Ashley Bradshaw | 

Aug 13, 2021 | 2 min read

Updated on March 17, 2026

Capital One

Refinancing a car loan can help save you money on your monthly payment. But before applying for auto refinancing, you should determine whether or not it's right for your situation. 

Here are some general instances in which you might want to refinance a car loan.

• An improved credit score
• Better financing terms and interest rates
• High monthly car payments causing financial stress
• Loan terms that don't allow for additional payments to pay off your loan faster

Without extending your loan term length, auto refinancing could lower your interest rate. A lower interest rate could reduce the amount you pay toward interest over a car loan. Learn more about when to consider refinancing a car loan. 

• What does refinancing a car loan mean?
• When should I consider refinancing my car loan?

What Does Refinancing a Car Loan Mean?

When refinancing a car loan, your new lienholder pays off your current lienholder. That lienholder takes over your loan and provides you with new terms in place of your original agreement.

When Should I Consider Refinancing My Car Loan?

In most cases, the earlier you’re able to refinance, the better. Once you lock in a lower rate, you’ll be able to spend less on your monthly payments. Even a small interest rate reduction could result in significant savings over the life of the auto loan.

There are certain scenarios in which refinancing a car loan may not be quite as helpful.

• Your car is more than 7 years old
• You’ve already paid off a significant majority of your existing car loan
• You have no car loan
• Your interest rate is already low or at 0%

Each bank or lending institution has its own requirements for refinancing. Review all of the conditions for a particular lender if you’re considering refinancing a car loan.

Many lenders offer calculators that show how changing your rate and loan term could impact your monthly payment. There are also options for pre-qualifying — a process in which you enter some basic information about you and your loan to check for custom offers and potential savings without impacting your credit score.

Ashley Bradshaw

Ashley Bradshaw is a seasoned writer and editor for Capital One Auto Navigator, where she uses her diverse editorial background to break down automotive tips, research, and other information for consumers. Prior to joining Capital One, Ashley served as a project manager for the Toyota and Lexus newsrooms through an agency partner. With a writing and editing career rooted in Dallas-Fort Worth media, Ashley previously contributed to regional publications including Southlake Style, Plano Magazine, and Addison Magazine. When she's not editing, Ashley enjoys reading, checking out new restaurants, and spending time with her family.