Refinancing a car loan can lower your monthly payment, reduce your interest rate, or both. It typically takes less than a week and costs nothing – most auto lenders charge no origination fees. Here is exactly how to do it.
When Refinancing a Car Loan Makes Sense
- Your credit score has improved. If you financed at the dealership with a 620 score and now have a 700+, you may qualify for a rate 3-5% lower.
- Rates have dropped. If market rates fell since you took out your original loan, refinancing captures those savings.
- You got a bad deal at the dealership. Dealers often mark up interest rates. Refinancing directly with a bank or credit union cuts the dealer out.
- Your monthly payment is too high. Extending your loan term reduces the monthly payment (but increases total interest paid).
When NOT to Refinance
- You are near the end of your loan (less than 12 months remaining)
- Your car is more than 10 years old or has over 100,000 miles
- You owe more than the car is worth
- Your credit has worsened since the original loan
Step 1: Know Your Current Loan Details
- Current interest rate and remaining balance
- Number of months remaining
- Current monthly payment
- Vehicle year, make, model, mileage, and VIN
Step 2: Check Your Credit Score
| Credit Score | Typical Auto Refi Rate Range (2026) |
|---|---|
| 750+ | 5.50%-6.50% |
| 700-749 | 6.50%-7.50% |
| 650-699 | 7.50%-9.50% |
| 600-649 | 10%-14% |
Step 3: Get Quotes from Multiple Lenders
Apply with at least three lenders. Multiple auto loan inquiries within a 14-day window count as a single hard pull.
- LightStream (Truist): Lowest rates, no fees, same-day funding. Best for excellent credit.
- PenFed Credit Union: Competitive rates, no prepayment penalty.
- myAutoloan: Matches you with multiple lenders simultaneously.
- Capital One Auto Finance: Good for mid-range credit.
- Your local credit union: Often beats big banks on rate.
Sample Savings Calculation
| Scenario | Original Loan | Refinanced Loan |
|---|---|---|
| Balance | $22,000 | $22,000 |
| Rate | 9.5% | 6.5% |
| Term | 48 months | 48 months |
| Monthly payment | $554 | $523 |
| Total interest | $4,590 | $3,104 |
| Savings | – | $1,486 |
Step 4: Complete the Application
The formal application asks for personal information, proof of income, vehicle details, and current lender information. Approval typically comes within hours. Funding usually within 2-5 business days.
Step 5: The New Lender Pays Off the Old One
Your new lender sends a payoff check directly to your old lender. You do not handle the money. Make your first payment to the new lender about 30 days after closing.
If you want to pay your loan off faster rather than refinancing, see our guide on paying off your car loan early. For comparing new vehicle financing options, see our best auto loans guide.
How Much Can You Save?
The average auto refinance saves $1,000-$3,000 over the life of the loan for borrowers with improved credit or who initially financed through a dealer. The process takes roughly 30 minutes of work to apply across multiple lenders.