Should I Refinance My Car Loan?

Here's the lowdown on why and when you should consider refinancing your auto loan.

Capital One

Originally published on June 3, 2018

Article QuickTakes:

You’ve probably heard of people refinancing home loans, but did you know that car loan refinancing also exists? Refinancing your car loan could be a great way to get a lower interest rate that saves you money monthly and over the life of your loan, often without extending your term length.


When you refinance your car loan, your new lienholder:

  1. Pays off your current lienholder
  2. Takes over your loan
  3. Provides you with new financing terms in place of your original agreement


Before applying for an auto refinance, you should determine whether or not it’s right for your situation. Many lenders offer helpful calculators for you to see the numbers on your current loan, how changing your rate and loan term could impact your payment, and the amount of interest you may pay. 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.

Some general instances in which you might refinance a car loan may include:

  • An increase in your credit score since taking out your auto loan
  • Discovering that you’re qualified for better financing terms than what you currently have; for example, through shopping around and finding out that you can likely get a better rate
  • Your monthly car payments are higher than what you’re comfortable paying
  • If the terms of your current loan don’t allow you to make additional payments to pay off your loan faster, refinancing your term length is another option

If any of the above applies to you, then it could be time to look for a lender to apply for refinancing. On the other hand, there are certain scenarios in which refinancing a car loan may not be quite as helpful, including if:

  • 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 will have its own requirements on whether they can offer you refinancing. Make sure you read all of the conditions for a particular lender if you’re considering to refinancing the loan on your vehicle.


In most cases, the earlier you’re able to refinance, the better. Once you get those lower rates, you’ll be able to spend less on your monthly payments, saving you more money. Keep in mind that even a small interest rate reduction could result in significant savings over the life of the auto loan.

By knowing whether refinancing your car will benefit your particular situation, you can make a big step towards improving your financial health.

This site is for educational purposes only. The third parties listed are not affiliated with Capital One and are solely responsible for their opinions, products and services. Capital One does not provide, endorse or guarantee any third-party product, service, information or recommendation listed above. The information presented in this article is believed to be accurate at the time of publication, but is subject to change. The images shown are for illustration purposes only and may not be an exact representation of the product. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.