Refinancing replaces your current auto loan with a new one, ideally at a lower interest rate or better terms, which can lower your monthly payment or reduce total interest paid. It tends to make the most sense if your credit score has improved since you took out the original loan, if market interest rates have dropped, or if you initially financed through a dealership at a marked-up rate. Before refinancing, it’s worth estimating your potential savings using our auto loan calculator, comparing your current rate and term against a new offer.
Refinancing isn’t always the right move — if you’re already several years into your loan and close to paying it off, the savings from a lower rate may not outweigh the fees involved in refinancing. It’s also worth considering whether prepaying your current loan faster might save more than refinancing would, covered in whether prepaying your auto loan early is worth it. If you do decide to refinance, comparing offers from multiple lenders — not just your original one — as discussed in dealer financing vs. bank auto loans, gives you the best chance at a meaningfully lower rate.