Best auto loan refinance rates for December 2024

Compare auto loan refinance rates from top lenders

When comparing auto loans, pay close attention to the available APR (annual percentage rate) and loan term. The APR is the interest rate at which you will repay your loan. The term is the amount of time that you agree to pay it back. These two aspects are especially important for a refinance loan to ensure you avoid the risk of becoming upside-down on your new loan.

A closer look at our top auto loan refinancing lenders

Not all refinance auto lenders are created equal. Some boast an online-only experience, while others are geared for in-person support. Many lenders also have specific eligibility requirements around vehicle age or loan amount. Consider the ins and outs of our top auto loan refinance lenders. 

What is auto refinancing?

Refinancing a car loan is essentially just taking out a new car loan — so the steps for applying are mostly the same. You'll need your driver's license, Social Security number and proof of income and insurance, as well as details about your car. If approved, you'll use the funds from your new loan to pay off your old car loan, then begin making monthly payments with your new interest rate and terms.

Pros and cons of refinancing an auto loan

The choice to refinance your auto loan requires some consideration about the state of your finances and vehicle. Weigh the benefits and drawbacks of refinancing before moving forward with it. 

When should you refinance your car loan?

Refinancing your car loan comes down to saving you money. If you are struggling to afford your vehicle payments or think you could receive more favorable terms, it’s a good idea to consider refinancing your current loan. Here are the main scenarios where refinancing is the right choice.

1. Your credit has improved: Competitive rates are reserved for drivers with very good or excellent credit — scores of 740 and above. So, if your credit score has risen since you signed off on your initial loan agreement, refinancing could save you money on your monthly payments.
2. You financed through a dealership: Dealer financing likely did not present you with the best available rates and terms. You might be able to get a better deal if you shop elsewhere and refinance your initial vehicle loan.
3. You can’t afford your monthly payments: If you are struggling to make your monthly vehicle payments and are at risk of losing your vehicle, it is a good idea to refinance your loan. This way, you can extend your terms to lower your monthly costs. Keep in mind that you will have to pay more interest over the life of the loan. 
4. You have positive equity: If you have positive equity in your vehicle, or the value of your vehicle is worth more than you owe, the cash-out refinance process could present you with some extra money and improved loan terms.
5. You have issues with your current lender: If you are struggling with your lender, refinancing may help avoid future problems. But look out if there are prepayment penalties enforced, which could outweigh your savings.
6. Interest rates dropped: Interest rates may start lowering after the federal funds rate was cut in September. If you financed your car when rates were higher, refinancing can help you take advantage of lower average rates.

How to refinance an auto loan

To successfully refinance your auto loan, follow these steps:

1. Decide if refinancing is the right financing move: There are two main situations where refi makes sense: you can secure a better rate or you need a lower monthly payment. 
2. Review your current loan: Most lenders require a minimum of $3,000 to $5,000 in order to refinance, check your payoff amount along with your terms before starting the process.  
3. Check your credit score: Check your credit score to see if it has improved since your original loan approval. The higher your credit score, the better your new rate will be. While you can still refinance with bad credit, you'll want to consider the risks first.
4. Estimate your car's value: Estimate your vehicle’s value and compare it with how much you owe on your loan. If you’re upside-down — meaning you owe more than the car’s worth — you’ll struggle to refinance. 
5. Determine your savings: Available interest rates vary by lender so shop around with at least three different providers. Be sure to compare potential rates with your current loan. 
6. Get your paperwork in order: Gather the necessary documentation and details of the current loan so you can walk away with better rates and terms.

FAQs about auto loan refinancing