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How To Refinance a Car

Refinance car is shown on a photo using the text

Not everyone gets the best rate when they finance a vehicle. The lowest interest rates are reserved for those with the highest credit scores, but that doesn’t mean you can’t qualify for a better rate after the fact. If you’ve improved your credit or interest rates have dropped on their own, you may want to consider refinancing your vehicle. You can often do this with a soft check on your credit report, so if you don’t qualify for a lower interest rate, it won’t hurt anything. Here’s how to refinance a car.

What Is Refinancing?

When you refinance something, you take out a new loan to replace your existing one. You can refinance your home or vehicle at any time. People refinance for a variety of reasons, such as:

  • Improved credit score: If you’ve improved your credit score by paying down debt, consolidating debt, or paying bills on time, you may qualify for a lower interest rate.
  • Increased income: A promotion or job change may increase your income, which can also mean a lower interest rate.
  • Decreased interest rates: If interest rates have dropped due to a change in the economy, you may want to consider refinancing to get a lower interest rate.
  • Positive equity: You may qualify for a lower interest rate due to a lower loan-to-value ratio if you owe less than your vehicle is worth.

Refinancing can be a good idea in many cases on vehicles purchased new as well as used, but there are some instances when refinancing may not be in your best interest. These include:

  • Prepayment penalties: If your existing loan has prepayment penalties, you’ll need to weigh those penalty charges to determine if you’ll come out ahead in the long run.
  • Negative equity: If you owe more than your vehicle’s worth, your loan-to-value ratio could be too high to qualify for refinancing, let alone a lower interest rate.

Every situation is different, so you need to determine if refinancing is advantageous to you. Even if you have to pay prepayment penalties, you may lower your overall monthly payment, which could save money overall. Perhaps you’re in jeopardy of losing your vehicle to repossession because your payments are too high, so a refinance could stretch the loan over a longer period to lower your monthly payments. Before deciding to refinance, consider your particular situation and run various scenarios to determine if a refinance is right for you.

Review Your Existing Loan

Once you’ve determined that refinancing could be a sound financial decision, it’s time to review your existing loan. When you refinance, you need to know your loan payoff amount. If your loan payoff is too low, you may not qualify, as many lenders have a minimum amount for refinancing. You should also know how much you’ve paid in interest, your minimum monthly payment, and the total cost of your existing loan if you kept it and paid it off in full. You can use an auto loan calculator to compare your existing loan to a possible refinance.

Check Your Credit Score

Your credit history and credit score are critical determining factors for your interest rate. Lenders perceive you to have a lower risk of defaulting on a loan if you have a higher credit score, making you an appealing borrower. Lenders also offer the lowest interest rates to those with high credit scores. Even if your credit score isn’t excellent, you may still qualify for lower rates if you’ve improved your score by paying down debt or making on-time payments.

Estimate Your Vehicle’s Value

You’ll want to know your vehicle’s value when considering a refinance. If your vehicle’s value is lower than what you owe on your existing loan, you’re upside down in your loan and may have to pay the balance between value and loan to refinance. Refinancing could save you money if your car has low miles and is newer with a value higher than what’s owed. You can use resources such as Edmunds or Kelley Blue Book car appraisal tools to get an estimate. You can also schedule an appointment for an appraisal at your local dealership.

Compare Refinancing Rates

Interest rates vary from one lender to another, sometimes by a significant percentage, so you’ll want to shop around to compare refinancing rates. Several factors determine your interest rate, including:

  • Your credit history and score
  • Your income
  • The amount financed
  • Vehicle age, mileage, and value
  • Loan term

A few of the best auto refinance rates available today include:


You can apply for a traditional, lease payoff, or cash-back refinancing through myAutoloan. You can finance $2,500 to $100,000 for 24 to 84 months with interest rates starting as low as 1.99%.


You can refinance your loan starting at $5,000 for 48 to 84 months with RefiJet. They have a starting interest rate of 2.49%. RefiJet charges a $395 administration fee on refinancing options.


Caribou allows you to refinance $10,000 to $100,000 for 24 to 84 months at rates as low as 2.99%. Caribou charges a $399 administration fee on all refinance transactions.

Determine Your Savings

After determining the interest rate you may qualify for based on your credit score, you can do the math to decide whether refinancing will save you money. Refinancing can save you money either monthly, in the long run, or possibly even both. Even if you don’t save money overall, the monthly savings could be worth considering a refinance. Know what your goal for a refinance is to help you decide whether it’s worth it.

Get Your Paperwork Together

Once you’ve researched lenders, compared rates, and determined that a refinance will help you obtain your money-saving goals, it’s time to get your paperwork together. Documents you need include:

  • Driver’s license
  • Loan payoff letter from the current lender
  • Vehicle registration
  • Proof of insurance

You may also need to provide a photo of the odometer, proof of income, proof of residence, or other documentation required by the individual lender.

Refinancing your vehicle can be a great way to save money on monthly payments, interest, or both. The steps for how to refinance a car are relatively simple and can often be completed online at your convenience. Research several lenders to compare rates and terms to ensure you get the best value for your money.

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.


About the Author

FIXD Research Team

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

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