According to Experian, the overall average auto loan interest rate for the 2^nd quarter of 2025 is 6.80% for new cars and 11.54% for used cars – and if you are currently dealing with an auto loan with these higher interest rates, an auto loan refinance can look like an attractive proposition.

Why should you refinance your auto loan? Here are the pros (and possible cons) of an auto refinance:

You can pay less in interest

If your credit score has improved since you originally financed your score, you could qualify for a lower interest rate, especially if you have built a history for making on-time payments over the past 6-12 months.

If you can you lower your current loan rate by 1% or more, you can save enough in interest over the life of your loan to make refinancing worthwhile. Our auto refinancing calculator can help you make sense of the numbers and illustrate how an auto refinance can save you money in the long term.

You may lower your monthly payment

If you need to adjust your car payment to better fit your budget, refinancing your auto loan can free up funds to pay off higher-interest debt. Keep in mind, though: in order to significantly reduce your monthly payment, you may need to extend your loan term, which can lead to paying more interest over the life of the loan.

You can pay your loan off more quickly

If you have had an increase in income since purchasing your car, and can afford a larger monthly payment, refinancing your loan for a shorter term might help you pay your loan ahead of schedule. You can also make larger payments on your existing loan, but refinancing could help direct more money to your principal rather than paying off interest.

When should you refinance your car?

• Interest rates have dropped since you took out your original auto loan: Even a small decrease can translate to significant savings over the life of your loan, reducing your total interest costs.
• Your credit has improved since you first financed: Higher credit scores often can provide access to lower interest rates on loans.
• Your current loan has no repayment penalties: If repaying your existing loan doesn’t trigger any fees (and Kirtland’s auto refinance loan has no fees!), refinancing can be more cost-effective.
• You’re having difficulty keeping up with payments each month: If you are having issues with making payments, refinancing can help provide you with a longer repayment period that will help lower your monthly payments. You’ll generally pay more in the long run, but you can realize short-term savings.

Most importantly, you should know what you want to accomplish with an auto loan refinance, and use that to help define what the best loan offer is for you. Making an informed decision about refinancing your auto loan can improve your financial situation.