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How Soon Can You Refinance a Car Loan?

June 9, 2022 by Space Coast Credit Union



If you’re unhappy with your current auto loan, you’re probably wondering how soon you can refinance to get a better deal. Refinancing a car loan entails paying off your current loan with a new auto loan—often with the goals of getting a better interest rate to help lower your monthly payment and save more money over the life of your loan. In this article, we’ll answer when the best time is to refinance your car and the scenarios that make it worth it. 
 

Can you refinance a car loan immediately?

In most cases, you can refinance a car immediately after purchasing it as long as you meet all of the qualifications. However, the best time to refinance a car depends on your financial situation and the terms of your current loan. 

Keep in mind the first 60-90 days of your loan involves settling the title transfer, along with any other paperwork. Also, when you first applied for a car loan, a hard credit inquiry was necessary, so your credit score needs time to recover from this minor impact, which usually takes about a year. 

So as a best practice, it’s ideal to wait at least one year before refinancing but you should have at least two years left on your loan. Having a minimum of two years left gives you the best potential to maximize interest savings over the life of the loan (since you pay more in interest during the initial years).
 

When is refinancing a car worth it?

Let’s take a look at the best scenarios to take a detour from your current car loan: 
 

1. If your credit score has improved

As you may be aware, lenders factor in your credit score heavily to determine a loan’s interest rate. Perhaps when you first got your car loan, you ended up with a high interest rate because you didn’t have a stellar credit score. 

Making on-time payments and reducing your overall credit line usage can help to greatly in improving your credit. Be sure to check your credit reports at AnnualCreditReport.com and correct any mistakes with the credit bureaus. According to a RateGenius report, on average those with a credit score between 661-780 have saved the most after refinancing, but so have those with scores above and below those ranges. 

If you’d like to improve your credit score, check out this credit score guide, which is chock-full of ideas to bump up your points.

Lenders also take into consideration your debt-to-income (DTI) ratio when calculating your rate. If yours has improved (either more income or less debt), now may be a good time to refinance. Learn more about calculating your DTI with our worksheet
 

2. If it will achieve your goal  

Perhaps you’d like to get a better interest rate to lower your monthly payment for the remainder of your loan, which could give you more spending money each month. Our refinance auto loan calculator can help you compare different interest rates and terms to determine if refinancing achieves your goal. 

In fact in 2021, Americans saved an average of $1,158 a year and reduced their interest rate by 7% by refinancing their auto loan!

Example: Let’s say your current loan looks like this:
  • Auto loan: $25,000
  • Loan term: 60 months
  • Interest rate: 6.04%
  • Monthly payment: $484 
  • Total amount: $29,027 
Then you decide to refinance after you’re a year into your loan, where you’ve made a total payment of $4,416. So, the figures would look like the following:
 
  • Remaining balance: $20,584
  • Loan term: 48 months
  • Interest rate: 3.49%
  • Monthly payment: $460
  • Total payments (with $4,416 from previous loan): $22,084 
  • Total savings: $2,527 ($29,027-$22,084) 
Our refinancing a car calculator below factors in credit scores that will help give you a better idea if (and when) it’ll work best for you.
 

In some situations, borrowers would like to shorten the length of the loan to pay off their ride faster. While this is possible with a lower interest rate, it could still result in a higher monthly payment, but you could still significantly save overall when refinancing. Learn more about if refinancing will meet your goals here.
 

3. If you’d like to switch lenders

You don’t have to stick with the same lender when you refinance your car loan. Maybe you’d like to switch because your current lender doesn’t offer good rates or good customer service. If you’re unhappy with your current situation, know that better options definitely exist. As a credit union, we offer low auto loan rates and place our members and their needs first. We also offer flexible terms9 and no payments for up to 120 days11 for those who qualify. 
 

4. If you’d like to add or remove a borrower

Having a co-signer who has better credit will most likely help you score a better interest rate for your auto loan. Or, vice-versa, you now have good credit and would like to refinance to remove a co-signer from the loan. 
 

5. If you’re leasing a car

As long as the leasing contract doesn’t have a buyback provision, you can refinance a car lease as soon as you’d like. But, it’s best to wait until the end of the lease so you’re not responsible for early termination fees and the payoff amount. Once you know the amount, you’ll need to find a lender that will issue you a loan. With good credit, you could even end up with a lower monthly payment. 
 

6. If you’d like to cash out

Although this reason is less common, here is another potential scenario: You paid a large down payment when you originally purchased the car or you’ve paid extra chunks of money to bring your balance down more quickly. In select circumstances, you may be able to refinance your ride to get cash to use for another purpose. 

Note: Even through the refinancing process, make sure you continue to make your payments on time because any missed payments could result in hurting your credit, fees, or disqualify you.

Learn more about how to refinance a car loan with this guide that cover benefits, myths, and the application process.
 

Auto Loan Refinance Interest Rates

Effective Date: July 01, 2022
Apply Now
Payment Period Refinance APR* "As Low As" Minimum Loan Amount Payment per $1,000
Up to 36 Months 1.99% No minimum loan amount $28.64
Up to 48 Months 3.49% No minimum loan amount $22.35
Up to 60 Months 3.49% $10,000 $18.19
Up to 66 Months 3.64% $10,000 $16.74
Up to 72 Months 3.79% $12,000 $15.55
Up to 75 Months 4.34% $15,000 $15.25
Up to 78 Months 4.64% $20,000 $14.88
Up to 84 Months 5.04% $25,000 $14.15
Rates shown are fixed Annual Percentage Rates for vehicle model years 2022 and newer. Rates are subject to change. Your actual rate and terms are affected by your creditworthiness, term selected, vehicle type, and model year. Rates only apply to refinances of non-SCCU auto loans. You may be asked to furnish a down payment. Florida loans are subject to Documentary Stamp Tax. The tax amount is not included in the quoted APR. Certain restrictions apply. 


When is refinancing a car not worth it?

It may not be worth it to refinance any time soon in these scenarios:
 

1. If you plan to apply for a mortgage, credit card, or other loan

Are you wondering if you should refinance your car before buying a house? Since applying for a loan (or credit card) involves a hard pull on your credit, it’s best to wait at least a year before auto loan refinancing to keep your credit scores in ship-shape. 
 

2. If your car is old or has a lot of miles on it

Cars depreciate quickly. Therefore, a lender may not consider refinancing your auto loan if it’s a certain age or has too many miles on it because it no longer holds enough value (equity). Also, if you want to do a cash-out refinance, you could also risk ending up owing more than the car is worth (going “upside down”) in the end.
 

3. If you’ve almost paid off your loan principal

As previously mentioned, you pay more in interest in the early years of your loan, so you most likely won’t be saving much overall if you have less than two years left on your loan. 
 

4. If the fees outweigh the savings

If your loan isn’t with SCCU, be sure to factor any pre-payment penalties or additional application fees into your decision-making process (you won’t have to worry about those fees with us). The costs of those fees, along with any extra costs involved with switching lenders or title changes, may not outweigh the potential cost savings, especially if your car has low equity, if your interest rate would be higher, or if you’ve almost paid off the loan.
 

5. If you’d like to trade in your ride

Perhaps after looking over the numbers or your qualifications, refinancing just isn’t in the cards, but you’d like to get a different auto loan. You could consider using any equity in your car as a down payment, or you could roll your remaining loan into your next one.
 

Why choose a credit union to refinance an auto loan?

Now that you know how soon you can refinance a car, it’s a good idea to consider a credit union as your lender. Credit unions are not-for-profit financial institutions that exist solely to benefit their members, with rates and fees that are typically lower than those at banks. So, you’re more likely to save more money over the life of your auto loan—a win-win! 

When you refinance your auto loan with Space Coast Credit Union, you don’t have to worry about an application fee or pre-payment penalties. Plus, we offer exclusive rates for community heroes. It’s easy to become a member if you live or work in any of these counties. Feel free to request more info or contact us here, and a Team Member will be happy to help.
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APR = Annual Percentage Yield

1CALCULATOR: The information provided by these calculators is intended for illustrative purposes only and is not intended to purport actual user-defined parameters. The default figures shown are hypothetical and may not be applicable to your individual situation. Be sure to consult a financial professional prior to relying on the results.

​2TERMS: Terms available up to 84 months and are based on your credit quality, vehicle type, model, and year. Our usual credit criteria apply. Your term may be different. Qualified borrowers only.

​3RATES: Rates are subject to change. Rates shown are fixed Annual Percentage Rates and are affected by your credit quality, model year, term selected, loan-to-value (LTV), and payment method. Your rate may be different. Qualified borrowers only. Our usual credit criteria apply. You may be asked to furnish a down payment. Rates shown for auto auto refinances are fixed Annual Percentage Rates for vehicle model years 2022 and newer. Florida loans are subject to Documentary Stamp Tax. The tax amount is not included in the quoted APR.
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