Yes, refinance if you drop your APR by 1 to 2 points
With 24 months left on your auto loan, refinancing makes sense if you cut your APR by at least 1 to 2 points. On a $10,000 balance, this saves $120 to $276 in interest. Monthly payments drop by $6 to $11. These savings scale up with larger balances. For example, a $15,000 loan at 7% to 4.5% saves about $414.
Auto loans spread interest over time, so you already paid most early interest. A lower rate now cuts costs on the rest. Many lenders offer terms from 24 to 60 months, which fits short-term loans like yours.
Example savings on $10,000 balance over 24 months
| Scenario | Old APR | New APR | Old Payment | New Payment | Interest Saved |
|---|---|---|---|---|---|
| Bigger drop | 7.0% | 4.5% | $448 | $437 | $276 |
| 1 point drop | 6.0% | 5.0% | $444 | $438 | $120 |
Numbers are estimates. Real offers depend on your credit, lender, fees, and taxes.
What to check first
Review these factors to see if refinancing fits:
- Credit score: A higher score gets you better rates.
- Loan balance: Lenders often want at least $7,500 to $10,000 left.
- Fees: Expect $0 to $300 for titles, registration, or lender costs. Check for prepayment penalties in your contract.
- New term: Stick to 24 months to save the most on interest. Extend to 36 months only if you need lower payments, but it adds interest. At 6% on $10,000, 24 months costs $444 monthly with $637 interest. 36 months drops to $304 monthly but raises interest to $944.
- Vehicle condition: Older cars over 10 years or 120,000 to 150,000 miles limit options.
- Break-even point: Subtract fees from interest savings. Positive results mean go ahead.
Steps to refinance
Follow these simple steps:
- Check your credit report and fix errors.
- Get prequalified from 2 to 3 lenders with soft credit pulls.
- Compare APR, total interest, and full cost, not just monthly payment.
- Watch for extras like GAP insurance you don't need.
- Apply. Let the new lender pay off the old one. Set up autopay.
Use a refinance calculator for your exact numbers. Sidekick tracks your loan and alerts you when refinancing lowers costs.