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When considering refinancing your car, you may be wondering about the out-of-pocket costs. What should you expect when you switch to a new lender and will you need to put money down?
The good news is the upfront costs of refinancing an auto loan are typically minimal. Most lenders keep the fees low and don’t require a down payment on the loan. However, you may need to pay a few regulatory fees to your state government or origination fees to your lender.
To help you prepare, here’s a breakdown of the common fees you’ll encounter during the refinancing process.
When you refinance, you often need to pay a title transfer fee and re-registration fee, although it varies by state. Most lenders keep application fees to a minimum but may charge a loan origination fee.
An application fee is a fee lenders charge to process applications. However, they aren’t commonplace in the auto refinance loan market where you can often apply for free. As you proceed with a lender, you may pay a loan origination fee.
Some states require you to re-register your vehicle when you refinance your auto loan with a new lender. If yours does, you’ll have to pay a fee which is often based on where you live and other factors such as your vehicle’s type, age, value or weight. For example, the registration fee for passenger vehicles and trucks that weigh 6,000 pounds or less in Texas is $50.75, plus a local fee that applies to your county (ranges from $0 to $21.50). Vehicles over the weight face higher costs.
When you finance a vehicle, your lender is added to your vehicle title as the lienholder, which gives them legal rights in the case of a default. Being so, a title transfer is generally required when you refinance to update the lienholder information. The process comes with a fee that varies by state, and sometimes by county. For example, the title fee in Boise County, Idaho is $14 while it’s $165 across Illinois.
Prepayment fees are fees lenders charge to borrowers who pay off their loans early. Thankfully, prepayment penalties on auto loans aren’t common and are even illegal in some states. You usually won’t have to worry about them, but it’s a good idea to keep an eye out just in case.
Down payments are common when buying vehicles, but rare during the refinancing process. You can typically borrow the full amount you owe, allowing you to pay off your current balance. However, lenders may request a down payment if there are concerns about your creditworthiness or loan-to-value (LTV) ratio.
When you apply to refinance an auto loan, the lender’s going to assess your LTV ratio. You can calculate it by dividing your loan balance by your car’s appraised value and multiplying it by 100. If it’s over 100%, you have negative equity, which means you owe more than your car is worth. In that case, lenders may deny your application or require you to pay down your balance to qualify.
So, what should you expect when it comes to the upfront cost to refinance an auto loan?
In most cases, you’ll need to pay a title transfer fee and possibly a re-registration fee. You can find both by looking up the fee schedule from the government authority on motor vehicles in your state or by asking your lender during the refinance process.
Most refinance lenders charge some type of fee to cover the costs of handling your loan paperwork, just like dealerships do when you purchase a car. Be sure to read the fine print of your current and proposed loan contract. Make note of any prepayment penalties, application fees, loan documentation fees, origination fees and anything else that will increase your costs.
Additionally, some lenders may request a down payment if your LTV ratio is too high or you don’t meet their other eligibility requirements.
While title and registration fees are set by the government, some lenders have higher interest rates and fees than others. To find a competitive deal, it’s important to shop around and compare offers from at least three lenders. You can often fill out a short online application to see if you prequalify, without hurting your credit scores, and will get an answer within a few minutes.
When comparing loan quotes, take note of the interest rate, term length, monthly payment amount, fees and overall cost of each loan. If you want help, an auto loan refinance calculator can help. Then, you can compare them to your current loan. If one of the new loans offers benefits that justify the costs, it may be time to make a switch.
Learn more about the typical costs involved with refinancing an auto loan.
You may need to cover fees for transferring your title to a new lender and re-registering your vehicle. The amount of the fees varies depending on your state’s (and sometimes your county’s) fee schedule. Additionally, some lenders may charge application fees or origination fees.
The average interest rate on new car loans is 6.61%, while used car loan rates average 11.74%, according to a 2024 report from Experian. Although specific data on average auto loan refinance rates isn’t readily available, RefiJet can help you see what rates you prequalify for within a few minutes.
You don’t typically need to put money down to refinance a vehicle. Lenders will usually refinance the full amount for qualified borrowers. But if you don’t qualify due to issues with negative equity, income or creditworthiness, a lender may require a down payment.
Putting money down when refinancing a car can help you get a lower interest rate, lower your monthly payments or reduce your overall borrowing costs. To decide if it’s worth it, weigh the benefits against the opportunity costs — such as saving the money or investing it elsewhere.
Wondering if you can refinance your car without your cosigner? Explore the options available for taking control of your auto loan that includes a cosigner.
