This is the most commonly asked question when it comes to an auto refinance loan. There are many factors that will come when figuring how much you will save when refinancing your current car loan.
Auto refinance loan example
Let’s say you bought a new car and financed an amount of $22,000 for 60 months through the dealership’s finance department. At the time you purchased the car you didn’t have any credit, you had bad credit, or the dealer unknowingly signed you at a higher rate than you qualified for.
Now you have a great car but a horrible car loan. Don’t feel bad, this kind of situation happens all the time at car dealerships across the nation. Car dealers are professional actors when it comes to selling cars. You get wrapped up in emotions and end up paying 18-21% interest or higher when buying the car.
After paying on your car for a few months, you decide to apply for a refinance loan with an online lender. You end up getting approved and since you’ve made your payments on time, you get approved for a low 8% interest rate.
Interest Rate Calculations on a $22,000 Car Loan |
Car Loan Payment | APR (Interest Rate) | Total Interest |
$606.99 | 21.95% | $14,419.45 |
$570.09 | 18.95% | $12,205.22 |
$500.00 | 12.95% | $8,000.28 |
$446.08 | 8.00% | $4,764.84 |
$435.11 | 6.00% | $4,106.11 |
$405.16 | 4.00% | $2,309.81 |
If your current rate from the dealership was 18.95% and you’re approved through an online company to refinance your car loan at an APR of 8%. You’ll end up saving $7,440.38 over the life of the loan! You’ll also lower your monthly car loan payment from $570.09 to $446.08. Giving yourself an extra $124.01 to do with what you wish.
As you can see from the example above. Taking a few minutes to apply for an auto refinance loan doesn’t cost you a penny and may save you a few thousand dollars in interest charges over the life of the loan.