How Much Does It Cost to Refinance a Car?

Refinancing your car can be a great way to save money on interest, especially if you qualify for a lower interest rate than you have with your current auto loan. But there are other costs to consider. What you pay to refinance your car can vary depending on your state and your lender, as well as the terms of the loan. Some costs may be optional, while others, such as government fees (where applicable), are mandatory.

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Knowing how much it costs to refinance a car will help you decide whether it’s the right option for you. Read on to learn how much you can expect to pay with online auto refinancing.

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Key takeaways

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• How much it costs to finance a car depends on where you live, the terms of your new loan, and whether there are any fees to pay off your old loan early.
• Make sure you compare the costs of refinancing your car loan with the savings you could get from a lower rate or different term length.
• To reduce your refinancing costs, shop around, negotiate with your lender or look for a no-cost auto refinance loan. Use tools like RefiJet to quickly compare loan offers from multiple lenders.

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Common fees associated with auto refinancing

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The main factor determining what it costs to refinance an auto loan is the fees. You may pay nothing, or your lender may charge certain fees, such as:

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• Origination fee: This fee covers the cost of originating your loan, including underwriting to make sure you’re a good candidate to borrow money.
• Prepayment penalty: Check your existing loan documents to see whether there is a penalty fee for paying the old loan off early, which is what happens when you refinance into a new loan. This is uncommon for most auto loans, and it’s even illegal in some states.

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You may also have to pay government fees, depending on where you live. These could include:

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• Transfer fee: Some states charge a fee to transfer the vehicle title from the old lender to the new lender.
• Registration fee: If you need to re-register the vehicle after refinancing, you may also owe a registration fee.

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If you add any extras, such as a GAP waiver or an extended warranty, that could add to your costs, too.

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Do you need a down payment to refinance?

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Usually, you don’t need a down payment to refinance an auto loan. You’ll simply apply for a loan amount large enough to pay off your existing car loan. You may even be able to borrow more than you owe, which lets you receive the difference in cash.

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However, there are times when a down payment on your refinance is beneficial or even necessary. For example, if you have bad credit, your lender may not want to loan you the entire loan amount. In that case, you’d need to put some money down to secure the refinance loan.

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Another example is if you’re “underwater” on your current car loan, meaning you owe more than the car is worth. If that’s the case, the lender may need you to pay the difference. For example, if you owe $30,000 but your car is only worth $27,000, the lender may require a $3,000 down payment during the refinancing process. 

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How to minimize your refinancing costs

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How much it costs to refinance a car isn’t always set in stone. Although some costs may be mandatory, there are ways you can save, especially if you do some research up front. A few methods for reducing your refinancing costs include: 

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• Shopping around: Compare loan offers from multiple lenders. Make sure you look at not only the interest rate, but also the fees. 
• Negotiating: You may be able to negotiate with your lender on some of the costs, especially if you’re refinancing with the same lender. That’s because you have an established client relationship, and they could be willing to make a deal to keep you as a customer.

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Is refinancing worth the cost?

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When you know how much it costs to refinance a car, you can weigh the potential savings against the expense and decide whether it’s the right solution for your situation. Refinancing can be an effective way to lower your monthly payment or save money on interest, but you should consider how it will affect your total loan costs and account for any fees.

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It may be worth it if: 

• Your credit score has improved and you qualify for a better interest rate. Thousands of dollars in savings here would offset any fees.
• You comparison shop and find a lender with zero or minimal fees.

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It may not be worth it if: 

• You owe more than your car is worth and need to pay off negative equity to secure a refinance.
• Your new loan extends your term too much. Consider if the savings on your monthly payment outweigh the costs of paying on your loan for longer.

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You’ll need to run the numbers for your individual situation to know for sure. Get started today by comparing refinance offers from dozens of lenders, with no impact to your credit.

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FAQs

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Below are some commonly asked questions about the cost to refinance an auto loan.

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Does it cost money to refinance a car?

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Yes, it may cost you money to refinance your car. Lenders may charge a range of fees to process the new auto loan, such as an origination fee. Additionally, while it doesn’t cost you money upfront, refinancing your loan to extend the term could cost you more money in interest. 

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How do I know if refinancing will save me money in the long run?

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The best way to know if a refinance will save you money is to total up your refinance costs, including fees, and compare them to your potential cost savings. If the fees are less than the savings, it may be worth it.

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Does my credit score affect the cost of refinancing my auto loan?

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Yes, your credit score plays into the cost of refinancing, primarily because it affects the interest rate you may qualify for. You’ll need a good credit score to qualify for the lowest rates. If you can lower your interest rate with a refinanced auto loan, it may save you money.

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Can I roll any refinancing costs into my new loan?

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Some lenders may let you roll your refinancing costs, such as origination fees, into your new loan. They may also let you include government fees, such as title fees, in the new loan. If you owe more than your car is worth, some lenders may let you roll the negative equity into a refinance loan. Keep in mind that these can increase your loan amount, which may cost you more over time.

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Do different states have different fees for refinancing a car loan?

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Yes, the government fees that apply to an auto refinance vary by state. You can check in with your state’s department of motor vehicles to find out what it could cost to re-register your car, transfer your title, or anything else required by your state.

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