How Much Can I Save by Refinancing My Car Loan?

June 20, 2025 by Partner Colorado Credit Union
If you’re like many car owners, your monthly car payment is just another part of your budget. But what if you could reduce that payment—and keep more money in your pocket—by refinancing your car loan? Refinancing a car loan is one of the most overlooked ways to save money, but it can make a meaningful impact on your monthly expenses and total interest paid over the life of the loan.

Let’s break down what refinancing your car loan really means and how much you could potentially save.


What is Auto Loan Refinancing?

Refinancing your car loan, also known as an auto loan in the financial industry, simply means replacing your existing car loan with a new one—usually with a different lender and at a better interest rate, different term length or both. The goal is to reduce your monthly payment and/or your total interest cost.


Key Reasons to Refinance

Here are several scenarios when refinancing your car loan makes sense.
Your credit score has improved, qualifying you for better interest rates.
You want to lower your monthly payment to free up cash.
You want to pay off your loan faster by shortening the term.
Interest rates have dropped since you took out your car loan, and you can get a better rate than what you currently have.


How Much Can You Save?

The exact amount you can save depends on factors like your loan balance, interest rate, loan term and credit score. Here’s a simple example.

Let’s say you bought a car two years ago with a car loan for $25,000 at a 3% interest rate for 72 months. Your monthly payment would be about $380.

After two years, you still owe around $14,000 on the loan. If you refinance that balance for 72 months at a 5% interest rate, your new monthly payment would be about $226—a savings of $154 per month. Plus, you’ll also save hundreds of dollars in interest.

You can use our free online calculator to compare two different car loans.

Other Benefits of Refinancing

Improved Cash Flow: Lower monthly payments free up funds you can put toward savings, credit card debt or everyday expenses.

Better Budget Control: Refinancing allows you to reset your loan term, helping you better match your payment schedule to your current financial situation.

Credit Score Boost: Managing your new car loan responsibly may improve your credit score over time, giving you even better lending options in the future.


Things to Consider

Before refinancing your car loan, keep these tips in mind.
Check for prepayment penalties on your current loan.
Know your credit score, as better scores typically get better rates. You can view your FICO® Credit Score via our mobile banking app.
Shop around and compare offers from multiple lenders, including credit unions, which often offer lower rates than banks.
Look at total interest paid, not just the monthly payment, to determine if refinancing really benefits you.


Ready to Refinance?

At Partner Colorado, we’re here to help you make smart financial decisions. If you think refinancing your car loan could save you money, we invite you to talk to one of our loan experts. We’ll help you compare your current loan to potential refinance options and show you exactly how much you could save.