How car refinancing works
A car loan payment is the balance, the monthly rate, and the term, worked through the loan formula: the payment is the balance times the monthly rate, divided by one minus one plus the monthly rate to the power of minus the term. The monthly rate is the APR divided by 12. The total interest is the payment times the term, minus the balance. Refinancing replaces the old payment with a new one on the same balance: the monthly saving is the old payment minus the new one, the yearly saving is the monthly saving times 12, and the total interest saved is the old total interest minus the new total interest. The refinance fees are added to the cost, not to the new balance, so the net saved is the total interest saved minus the fees. The break-even is the fees divided by the monthly saving, rounded up to whole months.
At the defaults — a $20,000 balance, current APR 9.5%, 48 months left, new APR 6.5%, new term 48 months, fees $300 — the current payment is $502.46 a month and the new payment is $474.30 a month, so the saving is $28.16 a month and $337.96 a year. The total interest is $4,118.21 now and $2,766.35 after refinancing, so $1,351.86 of interest is saved and $1,051.86 after the $300 of fees. The break-even is 11 months: 10 months of saving is $281.64, which is short of the $300, and 11 months is $309.80, which covers it.
| Case | Current /mo | New /mo | Save /mo | Total interest saved | Net saved |
|---|
| Default ($20,000, 9.5% / 6.5%, 48 mo, $300 fees) | $502.46 | $474.30 | $28.16 | $1,351.86 | $1,051.86 |
| Balance $15,000 | $376.85 | $355.72 | $21.12 | $1,013.89 | $713.89 |
| Balance $25,000 | $628.08 | $592.87 | $35.20 | $1,689.82 | $1,389.82 |
| Balance $30,000 | $753.69 | $711.45 | $42.25 | $2,027.78 | $1,727.78 |
| New APR 8.0% | $502.46 | $488.26 | $14.20 | $681.81 | $381.81 |
| New APR 5.0% | $502.46 | $460.59 | $41.88 | $2,010.09 | $1,710.09 |
| New term 60 months | $502.46 | $391.32 | $111.14 | $638.83 | $338.83 |
| New term 36 months | $502.46 | $612.98 | -$110.52 | $2,050.93 | $1,750.93 |
| Current APR 7.5% | $483.58 | $474.30 | $9.28 | $445.39 | $145.39 |
| Current APR 12% | $526.68 | $474.30 | $52.38 | $2,514.13 | $2,214.13 |
| Fees $0 | $502.46 | $474.30 | $28.16 | $1,351.86 | $1,351.86 |
The worked example, line by line
Setup: balance $20,000, current APR 9.5%, remaining term 48 months, new APR 6.5%, new term 48 months, fees $300.
Line 1 — the current payment. The monthly rate is 9.5% ÷ 12 = 0.7917% a month, and the loan formula on $20,000 over 48 months gives $502.46 a month.
Line 2 — the new payment. The monthly rate is 6.5% ÷ 12 = 0.5417% a month, and the loan formula on $20,000 over 48 months gives $474.30 a month.
Line 3 — the monthly and yearly saving. $502.46 − $474.30 = $28.16 a month. The yearly saving is the unrounded monthly gap times 12, which is $337.96 — 4 cents more than $28.16 times 12, because the figures are computed from unrounded values and rounded only for display.
Line 4 — the total interest both ways. $502.46 × 48 − $20,000 = $4,118.21 now, and $474.30 × 48 − $20,000 = $2,766.35 after refinancing, so the total interest saved is $1,351.86. Both totals are computed from the unrounded payments, so the current interest is 13 cents more than the rounded $502.46 times 48 minus $20,000.
Line 5 — the net after fees. $1,351.86 − $300 = $1,051.86. The fees are added to the cost, not to the new balance.
Line 6 — the break-even. $300 ÷ $28.16 = 10.65 months, rounded up to 11 months: 10 months of saving is $281.64, which is short of the $300, and 11 months is $309.80, which covers it.
Reverse: the new APR for a $50 a month saving is 4.10% (exact 4.0985); for a $450 a month payment it is 3.82% (exact 3.8231); the new term for a $450 a month payment at 6.5% is 51 months (exact 50.98 — a 51-month payment is $449.87 and a 50-month payment is $457.68); for a $400 a month payment it is 59 months (exact 58.47 — a 59-month payment is $396.94 and a 58-month payment is $402.75); the most fees for a 12-month break-even is $337.96 and for 6 months $168.98; and no APR gives a $100 a month saving, because the most possible is $85.80 a month at 0% APR (payment floor $416.67).
Every branch, checked
Balance $15,000: the current payment is $376.85 and the new payment is $355.72, so the saving is $21.12 a month, the total interest saved is $1,013.89, and the net is $713.89. A smaller balance saves less in dollars, because the interest is a percent of the balance.
Balance $25,000: the current payment is $628.08 and the new payment is $592.87, so the saving is $35.20 a month, the total interest saved is $1,689.82, and the net is $1,389.82. A bigger balance saves more in dollars, and the break-even is 9 months.
Balance $30,000: the current payment is $753.69 and the new payment is $711.45, so the saving is $42.25 a month, the total interest saved is $2,027.78, and the net is $1,727.78. The break-even is 8 months.
New APR 8.0%: the new payment is $488.26, so the saving is only $14.20 a month, the total interest saved is $681.81, and the net is $381.81. A small rate cut still pays, but the break-even stretches to 22 months.
New APR 5.0%: the new payment is $460.59, so the saving is $41.88 a month, the total interest saved is $2,010.09, and the net is $1,710.09. One and a half more points off the rate adds $13.72 a month against the 6.5% offer.
New term 60 months: the new payment falls to $391.32, so the saving is $111.14 a month — but the total interest after refinancing is $3,479.38, which is more than the 48-month new total of $2,766.35, so the total interest saved is only $638.83 and the net is $338.83. Stretching the term buys a low payment with more interest.
New term 36 months: the new payment rises to $612.98, so it costs $110.52 a month MORE — but the total interest after refinancing is only $2,067.28, so the total interest saved is $2,050.93 and the net is $1,750.93. The short term is the best deal in total, if the higher payment fits the budget.
Current APR 7.5%: the current payment is $483.58, so the saving is only $9.28 a month, the total interest saved is $445.39, and the net is $145.39. If the current rate is already low, refinancing barely pays — the break-even is 33 months.
Current APR 12%: the current payment is $526.68, so the saving is $52.38 a month, the total interest saved is $2,514.13, and the net is $2,214.13. A high current rate is where refinancing pays best, and the break-even is 6 months.
Fees $0: with no fees the net is the whole $1,351.86 of interest saved, and the break-even is 0 months — the saving starts at once.
Reverse — the other way round: the new APR for a $50 a month saving is 4.10%; for a $450 a month payment it is 3.82%; the new term for a $450 a month payment at 6.5% is 51 months; for a $400 a month payment it is 59 months; the most fees for a 12-month break-even is $337.96; and no APR gives a $100 a month saving, because the most possible is $85.80 a month at 0% APR.
What the defaults assume
The model assumes the balance is the payoff amount on the old loan, both APRs stay fixed, payments are monthly and on time, and the refinance fees are paid out of pocket — added to the cost, not rolled into the new balance. It assumes no prepayment penalty on the old loan and no change to the car’s value or insurance. It assumes the total interest is the simulated payments times the term minus the balance, using the same balance on both sides. With a 0% current APR the current payment is $416.67 and the new payment is $474.30, so the saving is -$57.63 a month — the refinance would cost more, not less. With a 0% new APR the new payment is $416.67, the saving is $85.80 a month, the net is $3,818.21, and the break-even is 4 months (3 months saves $257.39, 4 months saves $343.18). With a balance of $0 the payments and the interest are all $0.00 and the net is -$300.00, because the fee is still charged. With the new APR equal to the current APR on the same term the saving is $0.00 and the net is -$300.00. With $1,000 of fees the net is $351.86 and the break-even is 36 months (35 months saves $985.73, 36 months saves $1,013.89). Rounding convention: all figures are computed from unrounded values and rounded only for display — money to cents, APR to two decimals, and whole-month break-evens use the ceiling of the unrounded ratio, so a figure worked out from the rounded numbers can differ by a few cents from the figure shown.
Output · formula · meaning
| Output | Formula | What it means |
|---|
| Current payment | loan formula on the balance, current APR, remaining months | $502.46. |
| New payment | loan formula on the balance, new APR, new term | $474.30. |
| Monthly saving | current payment − new payment | $28.16. |
| Yearly saving | monthly saving × 12 (from unrounded values) | $337.96. |
| Total interest now | current payment × remaining months − balance | $4,118.21. |
| Total interest after refinancing | new payment × new term − balance | $2,766.35. |
| Total interest saved | total interest now − total interest after refinancing | $1,351.86. |
| Net saved after fees | total interest saved − refinance fees | $1,051.86. |
| Break-even | fees ÷ monthly saving, rounded up to whole months | 11 months. |
| New APR for a $50/mo saving | the new APR that makes the saving $50 a month | 4.10% (exact 4.0985). |
| New APR for a $450/mo payment | the new APR that makes the new payment $450 a month | 3.82% (exact 3.8231). |
| New term for a $450/mo payment | the new term that makes the payment $450 at 6.5% APR | 51 months (exact 50.98). |
| New term for a $400/mo payment | the new term that makes the payment $400 at 6.5% APR | 59 months (exact 58.47). |
| Max fees for a 12-month break-even | monthly saving × 12 | $337.96. |
| Max fees for a 6-month break-even | monthly saving × 6 | $168.98. |
| Max possible monthly saving | current payment − balance ÷ remaining months (0% APR) | $85.80. |
| Payment floor at 0% APR | balance ÷ remaining months | $416.67. |
| 0% current APR | same model, current APR 0% | Current payment $416.67, new payment $474.30, saving -$57.63. |
| 0% new APR | same model, new APR 0% | New payment $416.67, saving $85.80, net $3,818.21, break-even 4 months. |
| Balance $0 | same model, $0 balance | Current payment $0.00, new payment $0.00, net -$300.00. |
| New APR = current APR | same model, new APR 9.5% | Payment $502.46, saving $0.00, net -$300.00. |
| Fees $1,000 | same model, $1,000 fees | Net $351.86, break-even 36 months. |
| Balance $15,000 | same model, $15,000 balance | Current $376.85, new $355.72, save $21.12, interest saved $1,013.89, net $713.89. |
| Balance $25,000 | same model, $25,000 balance | Current $628.08, new $592.87, save $35.20, interest saved $1,689.82, net $1,389.82. |
| Balance $30,000 | same model, $30,000 balance | Current $753.69, new $711.45, save $42.25, interest saved $2,027.78, net $1,727.78. |
| New APR 8.0% | same model, new APR 8.0% | Current $502.46, new $488.26, save $14.20, interest saved $681.81, net $381.81. |
| New APR 5.0% | same model, new APR 5.0% | Current $502.46, new $460.59, save $41.88, interest saved $2,010.09, net $1,710.09. |
| New term 60 months | same model, new term 60 months | Current $502.46, new $391.32, save $111.14, interest saved $638.83, net $338.83. |
| New term 36 months | same model, new term 36 months | Current $502.46, new $612.98, save -$110.52, interest saved $2,050.93, net $1,750.93. |
| Current APR 7.5% | same model, current APR 7.5% | Current $483.58, new $474.30, save $9.28, interest saved $445.39, net $145.39. |
| Current APR 12% | same model, current APR 12% | Current $526.68, new $474.30, save $52.38, interest saved $2,514.13, net $2,214.13. |
| Fees $0 | same model, $0 fees | Current $502.46, new $474.30, save $28.16, interest saved $1,351.86, net $1,351.86. |
Who uses this
- The driver with a $20,000 balance at 9.5% APR: they learn the new payment is $474.30 against $502.46 now — so they know the saving is $28.16 a month and $1,051.86 after the $300 of fees, and they check the 11-month break-even before signing.
- The driver offered 8.0% or 5.0%: they learn 8.0% saves $14.20 a month and 5.0% saves $41.88 a month — so they know the lower rate is worth $27.68 a month more, and they check the $2,010.09 of total interest saved at 5.0% before taking the first offer.
- The driver who wants a $450 a month payment: they learn the new APR would need to be 3.82%, or the term would need to be 51 months at 6.5% — so they know which lever to pull, and they check the 4.10% that a $50 a month saving needs before asking the lender for more.
- The driver weighing a 36-month or a 60-month refinance: they learn 36 months costs $612.98 a month but saves $2,050.93 in total, against $391.32 a month and $638.83 saved at 60 months — so they know the short term is the best deal in total if the higher payment fits, and they check the $3,479.38 of total interest at 60 months before stretching.
Accuracy & limitations
The math is exact for the numbers you enter: each payment is the loan formula on the balance, the APR, and the term, the total interest is the simulated payments minus the balance, the net is the interest saved minus the fees, and the break-even is the fees divided by the unrounded monthly saving, rounded up to whole months. What the model cannot do is know your real loan: check the payoff amount, because the balance on your statement may not include the interest accrued since it was printed, and check the new APR, because the rate you are quoted may be for a different term or a different credit tier. It assumes the fees are paid out of pocket and added to the cost, not rolled into the new balance; if your lender rolls them in, the new payment and the total interest are both higher than shown. It assumes no prepayment penalty on the old loan and no change to the car’s value or insurance. It leaves out the time value of the money you save each month and any tax effect. For how the break-even works on any refinance, see how to calculate a refinance break-even; for choosing the term, see how to choose a car loan term.
Cite this calculatorBright Side Kit. “Car Refinance Calculator: New Payment & Savings 2026.” brightoolbox.com, 2026. Method: monthly rate i = APR ÷ 12; monthly payment P = B×i÷(1−(1+i)−n); monthly saving = current payment − new payment; yearly saving = monthly saving × 12; total interest = payment × term − balance; total interest saved = current interest − new interest; net saved = total interest saved − fees (fees added to the cost, not to the new balance); break-even = fees ÷ monthly saving, rounded up to whole months. Defaults: $20,000 balance, current 9.5% / 48 mo, new 6.5% / 48 mo, fees $300 → current $502.46, new $474.30, save $28.16/mo, $337.96/yr, total interest $4,118.21 / $2,766.35, saved $1,351.86, net $1,051.86, break-even 11 months. Branches: balance $15,000 → $376.85 / $355.72 / $21.12; balance $25,000 → $628.08 / $592.87 / $35.20; balance $30,000 → $753.69 / $711.45 / $42.25; new APR 8.0% → $488.26 / $14.20; new APR 5.0% → $460.59 / $41.88; new term 60 → $391.32 / $111.14, total interest $3,479.38; new term 36 → $612.98 / -$110.52, total interest $2,067.28, saved $2,050.93; current APR 7.5% → $483.58 / $9.28, current interest $3,211.75; current APR 12% → $526.68 / $52.38; fees $0 → net $1,351.86, break-even 0. Reverses: $50/mo saving → new APR 4.10% (exact 4.0985); $450/mo payment → new APR 3.82% (exact 3.8231); $450/mo at 6.5% → 51 months (exact 50.98); $400/mo at 6.5% → 59 months (exact 58.47); 12-month break-even → max fees $337.96; 6-month break-even → max fees $168.98; no $100/mo saving at any APR, max $85.80 at 0% APR (payment floor $416.67). Edges: 0% current APR → $416.67, save -$57.63; 0% new APR → $416.67, save $85.80, net $3,818.21, break-even 4 months; balance $0 → payments $0.00, net -$300.00; new APR = current APR → save $0.00, net -$300.00; fees $1,000 → net $351.86, break-even 36 months (35 mo saves $985.73, 36 mo saves $1,013.89). Bright Side Kit. "Car Refinance Calculator: New Payment & Savings 2026." https://brightoolbox.com/car-refinance-calculator/ Accessed October 25, 2026.
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