How Much Can I Save by Refinancing Your Car Loan?
Refinancing from 7.5% to 6.87% APR saves you money, but the exact amount depends on three key factors: your current loan balance, how many months remain on your loan, and how long you plan to keep your car.
Quick Savings Estimate
Here's what a 0.63% APR reduction saves on common loan amounts:
| Loan Balance | Monthly Savings | Annual Savings | 5-Year Total |
|---|---|---|---|
| $15,000 | $8 | $95 | $475 |
| $25,000 | $13 | $160 | $800 |
| $35,000 | $18 | $220 | $1,100 |
These estimates assume a 60-month loan term. Your actual savings will be higher if you have more time remaining or lower if you're refinancing a nearly paid-off loan.
How to Calculate Your Exact Savings
You need three numbers: your current loan balance, your remaining loan term in months, and your current payment amount. Use a loan calculator to compare:
- Your current monthly payment at 7.5% APR
- Your new monthly payment at 6.87% APR
- Subtract the new payment from the old payment
That difference is your monthly savings. Multiply by 12 to get your annual savings.
Don't Forget Refinancing Costs
Before you refinance, check if your new lender charges application, origination, or appraisal fees. These typically run $100 to $500. Calculate how many months it takes your monthly savings to cover these costs. If you plan to keep your car longer than that breakeven point, refinancing makes financial sense.
When Refinancing Makes the Most Sense
Refinancing works best when you have a large loan balance with many months remaining. A $15,000 loan with only 12 months left won't save much. But a $35,000 loan with 48 months remaining could save you over $800.
You also want to refinance with the same lender or a credit union that has low fees. Many credit unions charge $0 to refinance, which means you keep all your savings.
How Sidekick Can Help
Sidekick tracks your current loan terms and automatically alerts you when refinancing could save you money. We compare rates from multiple lenders and calculate your breakeven point so you know exactly when your savings offset any fees.