Many drivers may be overpaying: About 70% of car owners have never checked if they qualify for a lower auto loan rate through refinancing.
Refinancing could lower payments: Drivers with better credit or older high-interest loans may be able to save $50–$150 per month.
Compare multiple lenders: Check rates from lenders like PenFed, LendingClub, Caribou, Capital One, and Upstart before refinancing.
High mortgage interest rates seem to capture all the news, but it’s the monthly car payment that has quietly become one of the biggest budget stressors in many of our lives.
A new survey found that nearly one in three borrowers struggled to make a car payment on time in the past year. Even more surprising, 70% of car owners have never even checked to see if they could qualify for a lower interest rate through refinancing.
That matters because even a slightly lower rate could potentially save drivers $50, $100, or even $150 a month at a time when grocery bills, insurance costs, and everyday expenses continue to climb.
It could be time to stop thinking of your current auto loan as “good enough” and start looking at ways to lower your monthly car payment.
Many drivers felt pressured at the dealership
According to the survey, 44% of borrowers said they felt pressured during the original financing process, and one in four believe they did not get the best loan deal available.
When buying a car, most buyers focus solely on the monthly payment and getting approved.
But in the rush of the dealership process, many people never stop to compare:
- Interest rates
- Loan length
- Total interest paid
- Dealer markups on financing
The result is borrowers ending up locked into expensive loans. They then just setup monthly autopay and never revisit the loan again.
Why refinancing is getting renewed attention
When interest rates drop, or your credit score improves, refinancing can allow you to replace your existing auto loan with a new one that has:
- A lower interest rate
- Smaller monthly payments
- Lower total interest costs
According to Caribou’s survey:
- 71% of borrowers recognize refinancing can lower monthly payments
- 8% understand it may reduce interest rates
- But only 29% have actually checked their eligibility
In other words, many people know refinancing exists, but never take the next step.
Signs you should check refinancing rates
I think the first step is understanding that you don’t need to be in financial trouble to benefit from refinancing.
You should consider checking rates if:
- Your credit score has improved since buying the car.
- You financed during a period of high interest rates.
- Your monthly payment feels too high.
- You bought from a dealership without shopping rates.
- You’ve been making on-time payments for at least six to 12 months.
Even a modest interest rate drop can make a noticeable difference over several years.
For example, let's say you currently owe $28,000 on a vehicle:
- Current loan: 9% APR
- Refinanced loan: 6.5% APR
In this example, you can potentially lower your payments by more than $50 per month depending on the actual loan term.
The biggest refinancing myths
Many borrowers avoid refinancing because they assume it could hurt their credit, the process is complicated, and fees can erase any potential savings.
But that’s not always true these days, as many lenders now offer:
- Soft credit checks to preview rates before you decide
- Online applications to make the process faster
- No application fees
And while refinancing can temporarily ding your credit slightly if you move forward with a hard inquiry, experts say the impact is often small compared to the long-term savings potential.
Pro tip: Don’t stretch your loan out too long just to get a lower payment. While it may reduce monthly costs, it can also increase the total interest you pay over time.
Five reputable places to potentially refi your auto loan
Here are five solid places to check if you’re thinking about refinancing your auto loan. Based on customer reviews and approval requirements, they all have different strengths depending on your credit score and current situation.
- PenFed Credit Union: PenFed is a good option if you have decent credit and want a lower interest rate without a lot of hoops to jump through. A lot of military families use them, but regular consumers can join too. They also tend to offer longer loan terms and competitive rates compared to traditional banks.
- LendingClub: LendingClub is popular because you can check rates without immediately dinging your credit score. It’s a good option for people with average credit who just want to see what refi rate they can qualify for. Reviews state that their online process is pretty simple, especially when compared to the dealership experience that most people dread.
- Caribou: Caribou works more like a comparison-shopping site, but they’re specifically for car refinance loans. This can save you a bunch of time as you don’t have to check lenders one by one. They’ll do the work for you and allow you to compare a bunch of refinance offers in one place. If you end up using them, as part of their service, they’ll even handle your car payoff, title transfer, and DMV steps.
- Capital One Auto Refinance: Capital One keeps things pretty straightforward and easy to navigate. Reviewers noted that their refinance process is very “user-friendly,” and a lot of borrowers like them because there’s less of the confusing fine print you often get with auto loans.
- Upstart Auto Refinance: Upstart can be worth checking if your credit history is thin or not perfect. That’s because they look at more than just your credit score, which can help younger borrowers or people who may have improved their finances recently but still don’t have a long credit history.
Pro tip: Many borrowers only look at the monthly payment. Instead, be sure to compare the total interest cost over the life of the loan.
Watch out for these refinancing mistakes
I’d be remiss it I didn’t point out that refinancing is not automatically the right move for everyone.
Be cautious if you’re in these situations:
- Your current loan is almost paid off.
- The potential lender charges you large fees.
- Your car is worth far less than what you owe.
- The new loan dramatically extends your repayment timeline.
Keep in mind that a lower monthly payment is not always a better financial deal if it keeps you in debt for more time. Always do the math on your current auto loan before you immediately jump into a refinanced loan with a lower rate.