The best auto refinance rates in 2024 with direct lenders and loan marketplaces (2024)

The average interest rate on new car loans was 7.18% in 2023, up from 3.92% in 2021, according to Experian. But if you had less-than-stellar credit when you applied, your rate could be in the double digits. (And while you can refinance an auto loan with bad credit, you’re unlikely to save much money, if any.)
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Refinancing your auto loan can be an excellent way to save money and reduce your monthly payment, but rates, terms and vehicle requirements vary by lender — particularly if you’ve improved your credit. We evaluated top car loan lenders to identify the best auto refinance loans to help you manage your debt.

Why refinance your auto loan?

• Potential savings: If you qualify for a lower rate, you could save hundreds or even thousands of dollars over the life of your loan. Using an auto loan refinancing calculator (like Calculator.me’s) can do the math for you.
• Reduced payments: Refinancing to a lower rate or longer loan term could reduce your monthly payments. Keep in mind that choosing a longer term will result in higher total interest charges, as a calculator can demonstrate.
• Pay off the loan sooner: When you refinance, you can select a shorter loan term and pay off your car loan ahead of schedule. A shorter term means you’ll save money on overall interest payments, but remember that it also usually results in higher monthly payments.
• Cash-out options: Some lenders allow you to refinance your loan for more than the remaining balance and receive the rest in cash. The extra funds can be used for any legal purpose, but cash-out refinancing often has a higher APR and can leave you upside down on your loan, so proceed with caution.

How auto loan refinancing works

When you refinance an auto loan, you take out a new loan from a refinancing lender for the amount of your existing debt. The lender pays off your current creditor so the original loan is paid in full. Going forward, your auto loan debt is repaid to the refinancing lender. (You could also seek a cash-out refinance loan whereby you borrow more than your existing debt and pocket the difference, but this may be unwise if it results in owing more than the car is worth or significantly increases your cost of borrowing.)

Not all cars are eligible for refinancing; lenders often limit vehicles to those less than 10 years old with fewer than 120,000 miles. Also, most lenders often have minimum loan balances they’ll refinance and may require that you have made a certain number of payments on the original loan.

Related >> Other types of auto loans

When it makes sense to refinance your auto loan

Refinancing can help you save money, but it’s not always the right move. It can be a good idea in the following scenarios:

• Your credit scores have improved. The auto loan refinance rate you receive is partly based on the strength of your credit scores. The lowest rates are typically reserved for borrowers with excellent credit, so if you’ve raised your scores since taking out the original loan, you may qualify for lower rates.
• Interest rates have dropped. If market conditions have changed since you took out your existing loan, refinancing can help you take advantage of current rates. But keep in mind that rates are currently much higher than they were several years ago.
• You can’t afford your payments. Refinancing to a loan with a lower rate or a longer term can give you a more manageable monthly payment.
• You used dealer financing. In many cases, financing a car loan through the dealership doesn’t result in the lowest possible rates. You may qualify for a lower rate by shopping around with other lenders.
• You want a new lender. If you’ve had customer service issues with your current lender, you may consider refinancing to take your business elsewhere.

When you should avoid refinancing your auto loan

• You already have a lower-than-average rate. One of the key benefits to refinancing is accessing a lower rate, so if your rate is lower than what’s currently being offered, it may not be wise because a new loan could cost you more each month and overall.
• You owe more than your vehicle is worth. Most lenders aren’t willing to refinance a car that has negative equity. The lenders that will refinance loans with LTVs above 100% tend to charge much higher interest rates to offset their risk, eating into your potential savings.
• Your credit scores have dropped. You may not qualify for an APR that results in financial savings if your scores are lower than when you originally borrowed. However, if interest rates have dropped significantly, you may still be able to snag a lower rate, even with lower scores.
• Your auto loan is brand new or nearing the end of its term. Deciding when to refinance your car is essential — if you just bought the car, you may not be eligible to refinance, and if you’re close to paying it off, you may not see much financial benefit from refinancing.

Refinancing a car loan can allow you to qualify for lower rates, which can help you save money and pay off your debt faster. Plus, if you have positive equity in your vehicle, you could apply for a cash-out refinance loan and receive some of that equity in a lump sum to help you meet other financial goals. However, by cashing out equity, you risk owing more than the vehicle is worth (also known as being upside down on the loan).

However, your original lender may charge a prepayment penalty for repaying your loan ahead of schedule, and your new lender will charge a handful of fees (such as origination or title transfer fees) — these additional costs could negate any savings you might see from refinancing.

How your auto refinance rate is determined

In most cases, the question of whether refinancing makes sense comes down to your car loan refinance interest rate. To qualify for the best rate possible and set yourself up for success, start by understanding the factors that lenders consider when determining your rate.

Credit scores

A lender’s lowest rate usually goes to borrowers with “excellent” credit — that is, FICO scores above 800. However, you’re still likely to qualify for a competitive rate if you have good credit scores above 670. Generally, the higher your scores, the lower your rates will be.

Here’s a look at the interest rates you may expect based on your credit scores:

Loan-to-value ratio

The lower your loan-to-value ratio (LTV), the better your rate will likely be. A low LTV means that you have significant equity in the vehicle and are therefore less likely to abandon it and stop making payments. This reduced risk motivates lenders to offer a lower rate.

If your LTV is above 100%, your auto loan is upside down and refinancing can be challenging. This is because the lender is unlikely to recover the full loan amount by selling the vehicle in the event of default and repossession.

How to calculate your LTV: Start by estimating your car’s value using industry guides like Edmunds. Then, divide your auto loan balance by the car’s estimated value. Finally, multiply the result by 100 to convert your LTV to a percentage.

Example: Let’s say you owe $20,000 on your auto loan. After entering details about your vehicle into an industry valuation tool, you estimate that your car is only worth $16,000, thanks to depreciation. Your LTV is 125%.

$20,000 / $16,000 = 1.25

1.25 x 100 = 125%

Since you owe more than the vehicle is worth, your auto loan is upside down and you may struggle to find an auto refinance lender. (But some lenders, like Digital Federal Credit Union, refinance LTVs up to 130%.) If you’re eligible for refinancing, expect to pay a higher interest rate due to the increased risk.

Repayment term

Longer terms can reduce your monthly payments, but they also increase the lender’s risk. Your financial situation is more likely to change over the course of a prolonged repayment term, increasing your risk of default. As a result, lenders typically assign higher rates to long loan terms. (You’ll also pay more interest overall with a longer term.)

Your vehicle

Newer vehicles and cars with low mileage are typically considered to be less risky to finance — they’re less likely to need extensive, costly repairs that could stretch a borrower’s budget and push them toward default. That also explains why auto loan rates for new cars tend to be several percentage points lower than rates for used vehicles.

Most auto refinance lenders restrict the age and mileage of the cars they’ll finance, commonly maximums of 10 years and 120,000 miles, respectively.

Market factors

Like any other loan, auto refinance loan rates are subject to market conditions. So, in a high-rate environment, you may not be able to find a lower rate, regardless of your credit profile. But the reverse is also true — when rates drop across the board, auto loan rates follow suit.

How to snag the best auto refinance rate

• Improve your credit scores. In general, you’ll need credit scores of 740 or higher to qualify for the lowest rates. If your credit doesn’t meet that threshold, focus on increasing your scores by paying down your balances, making your monthly payments on time and limiting new credit inquiries.
• Choose a shorter loan term. Although some lenders offer repayment terms as long as seven years, longer terms tend to have higher rates. For the lowest possible rate, opt for the shortest loan term you can afford. Typically, the best rates apply to loans with terms of four years or less.
• Compare multiple lenders. Rates, terms and eligibility requirements vary by lender, so request quotes from several companies (mixing in a variety of banks, credit unions and online financial institutions) and compare APRs. Some lenders offer pre-qualification, which allows you to view your loan options without impacting your credit.
• Time your refinance strategically. Rates change over time along with economic conditions. If rates dip while you still have two years or more left in your loan term, refinancing might help you save money.
• Add a cosigner to your application. Your cosigner’s creditworthiness can improve your eligibility and help you access a competitive interest rate. But remember: If you default on the loan, your cosigner will be on the hook for repayment and their credit will be impacted.

8 steps to refinance your car loan

1. Check your credit scores

Your credit scores determine your interest rate and refinancing eligibility. You may have free access to your credit scores through your credit card company or financial institution, or you can pay for your scores via various third-party services.

If your scores are too low to qualify you for a lower rate, improve your credit scores before refinancing, perhaps by paying down existing debt and checking your credit reports (via AnnualCreditReport.com) for errors.

2. Review your current auto loan

Examine your existing loan agreement to locate the following information:

• Current APR
• Number of months of repayment remaining
• Monthly payment amount
• Loan payoff amount
• Prepayment penalty amount (if applicable)

This information is usually available through your lender’s payment portal or mobile app, or you can call your lender’s customer support line.

3. Estimate your vehicle’s value

Use industry guides like Kelley Blue Book or J.D. Power to determine what your car is worth based on its make, model, age, mileage and condition. If your vehicle is worth less than you currently owe, you may struggle to find an affordable refinancing option.

4. Determine whether refinancing is the right choice

With the above information in mind, decide whether refinancing makes sense. Use a car refinancing calculator to crunch the numbers. Be sure to factor in any fees and consider whether a shorter or longer loan term (with its added interest charges) could help you accomplish your goals.

5. Gather necessary documents

To refinance your loan, you’ll need the following documents:

• Your driver’s license
• Social Security number
• Current loan information, including lender name, account number and payoff amount
• Your vehicle’s identification number (VIN), registration and current mileage
• Proof of car insurance
• Proof of income, such as pay stubs or W-2s
• Proof of residency, such as a mortgage statement or rental agreement
• A loan payoff statement from your current lender

6. Compare lenders

Although auto rates rise and fall with the market, each lender sets its own rate, so it pays to shop around. Start by getting auto loan preapproval from multiple lenders to get an idea of what refinancing will cost. When comparing your loan options, consider the following factors:

• APR is how much you’ll pay in interest and fees annually, expressed as a percentage. This is a good measure of the cost of borrowing.
• Loan terms vary by lender but generally range from two to seven years. A longer term will result in lower monthly payments but a higher overall cost of borrowing. Generally, it’s wise to select the shortest term you can reasonably afford.
• Vehicle restrictions also vary by lender, but cars typically need to be 10 years old or newer and have fewer than 120,000 miles.

Example: Let’s say your auto loan has a $30,000 balance, a 12.00% interest rate and five years of repayment left. Your monthly payment is $667, and your credit scores have improved slightly since you originally borrowed.

If you need to reduce your monthly payments, you could refinance to a loan with a longer term. The first loan offer below is tagged at 11.00% for six years, so your payments would drop to $571 — a monthly savings of $96. However, the longer term would cost $1,074 more in interest over the life of the loan.

Alternatively, if you want to pay off your loan faster and save on overall interest, you could opt for the second loan offer. A four-year term could also qualify you for a lower rate. This loan results in a higher monthly payment, but you’d save $5,222 in interest.

7. Apply for the loan

Once you’ve selected a lender, complete an application and consent to a hard credit check, which can temporarily lower your credit scores by about five points. Often, the lender can issue a loan decision within minutes, but in some cases, it will ask for additional information, which may take a few days.

8. Close on the loan and begin repayment

If you’re approved, the lender will send you a loan agreement to review and sign. After you’ve returned the agreement, the lender will work with your existing creditor to pay off the loan on your behalf. Some lenders will send the loan funds directly to you, but this is less common.

Can you refinance an auto loan with bad credit?

Although it’s possible, it may not be advantageous to refinance with low credit scores. Rates for borrowers with less-than-perfect credit ranged from 14.12% to 21.55% during the fourth quarter of 2023, according to Experian, so refinancing may not help you save money.

Rather than applying for a bad credit car loan, a better strategy is to work on improving your scores or use a creditworthy cosigner or co-borrower who can help you qualify for better rates.

Example: Suppose your current 60-month auto loan has an APR of 12.00%, a balance of $20,000 and 36 months remaining on the term. Your current monthly payment is $664.

You’d like to refinance, but your credit scores have dropped and you can only qualify for a 36-month refinance loan with a 17.00% APR. Or, if you apply with a cosigner, you’re eligible for the same loan at 9.00% APR. Notice how the lower APR affects your monthly payment and overall cost of borrowing.

Working to qualify for a lower rate — either by increasing your credit scores or using a cosigner or co-borrower — can help you save money each month and overall. In this case, refinancing to Loan 2 could save you about $1,000 in interest charges.

Methodology

Our editors and research analysts combined efforts to identify the best lenders for auto loan refinancing. First, our editors created a rubric to assess 26 popular lenders across 33 criteria. Then, our research team collected over 850 data points and analyzed the results to narrow our list to the eight best auto refinance lenders.

Loan cost (35%)

Reducing the cost of an auto loan is often cited as the primary reason borrowers refinance their loans. With that in mind, lenders that advertise lower-than-average rates scored most favorably. We also considered any fees charged as well as interest rate discounts offered.

Loan details (30%)

Here, we examined the fundamental elements of each lender’s refinance loan, including loan terms, loan amounts and funding timeline. We also awarded points to lenders offering cash-out refinance loans and those willing to refinance their own auto loans.

Eligibility (20%)

The best auto refinance loan is the one that’s available to the broadest range of borrowers. This category examined lenders’ eligibility criteria for both borrowers and vehicles, including:

• Nationwide availability
• Credit requirements
• Vehicle age and mileage restrictions
• Whether cosigners and/or co-borrowers are permitted

Customer experience (15%)

In this final category, comprising 10 factors, we aimed to capture the quality of each lender’s customer service by assessing criteria like contact methods, customer service hours and whether the lender offers a robust mobile app. We also analyzed consumer reviews from independent organizations like the Better Business Bureau, Trustpilot and the Consumer Finance Protection Bureau.

What didn’t make the cut

Although each of the 26 lenders we assessed had benefits, only eight made our final list. Most lenders that didn’t score highly lost points for a lack of transparency, high rates or strict eligibility requirements. Here’s a look at several popular lenders who fell short for various reasons:

• Ally Bank, Capital One and OpenRoad Lending don’t disclose their starting APR.
• Caribou, myAutoLoan and U.S. Bank aren’t available nationwide.
• Auto Credit Express and RateGenius have low loan maximums.
• Auto Approve and iLending don’t specify which vehicles qualify for refinancing.
• Gravity Lending and Tresl don’t specify their minimum credit score requirements.

Additional reporting by Devon Delfino

Frequently asked questions (FAQs)