How Much Does It Cost to Refinance an Auto Loan?

Refinancing your auto loan can cost anywhere from $0 to a few hundred dollars, depending on the lender and your state’s requirements. Common fees include title transfer fees (typically $15–$85), registration fees ($50–$150), and potential lender application fees ($20–$100). Some lenders may not charge any fees, making refinancing a cost-effective option.

Even with upfront costs, refinancing can be worth it if you secure a lower interest rate, reduce your monthly payment, or save on total interest. By comparing lenders and factoring in fees, you can determine whether refinancing will provide long-term savings and fit your financial goals.

How much does it cost to refinance a car?

n many cases, lenders don’t charge upfront fees when you refinance your auto loan. However, it’s crucial that you review the new loan contract and your current loan agreement to make sure you understand the potential costs. Here’s a breakdown of common fees:

Fee type	Typical cost	Paid to
Application fee	$20 – $100	Lender
Title transfer fee	$15 – $85	Lender or state DMV
Registration fee	$50 – $150	State DMV
Prepayment penalty	1% – 2% of remaining loan balance	Original lender
Late fee	$25 – $50	Original or new lender

• Application fee: This fee covers underwriting costs. Some lenders charge this under other names, such as a processing fee, administrative fee, or lender fee. The amount typically ranges from $20 to $100, depending on the lender.
• Title transfer fee: When you refinance, the vehicle’s title must often be transferred into the new lender’s name. This fee varies by state but is generally between $15 and $85. Your lender or the state DMV will manage this process.
• Registration fee: Some states require you to reregister your car when switching lenders. You’ll typically pay the state DMV a fee ranging from $50 to $150, depending on local regulations.
• Prepayment penalty: If your current loan includes a prepayment penalty, you may be charged 1% to 2% of your remaining loan balance for paying off the loan early. This penalty may not apply if your original loan had a term exceeding 60 months or you live in a state that prohibits it.
• Late fee: Missing payments during the transition between lenders can result in late fees, typically $25 to $50. Ensure you continue making payments on your current loan until it is fully paid off and the new loan begins.

Fee example

Let’s say you want to refinance your car loan, which has a current balance of $15,000, a 7% interest rate, and a $325 monthly payment. 

You can qualify for a five-year loan with a 5% interest rate, but the new lender charges a $20 application fee and a $50 title transfer fee. Your state also requires you to reregister your car, charging a $100 fee for the service. 

You notice that your current lender charges a 2% prepayment penalty, and you’re still within the penalty period. Here’s how those costs will break down:

Cost	Amount	Paid to
Application fee	$20	New lender
Title transfer fee	$50	New lender
Registration fee	$100	State DMV
Prepayment penalty	$300	Original lender
Total	$470

However, with the new loan term, your monthly payment drops to $283, which is a $42 cutback compared to your original loan—and the new loan will save you $542 in total interest charges, outpacing the upfront costs. 

Read More

Use our online auto refinance calculator to help you crunch the numbers.

Also, remember that many auto lenders don’t charge refinance fees, so it’s possible that your upfront costs will be minimal or even nonexistent. Take your time to shop around and compare several lenders before settling on one. 

Tip

We recommend LightStream as the best auto refinance lender with no fees. Read more about this lender in our review.

How does auto loan refinancing work?

Refinancing an auto loan involves replacing your current loan with a new one, often with a different lender. While the process can be straightforward, fees play an important role at each stage and can impact whether refinancing is a financially smart decision.

Here’s how the process typically unfolds:

1. Evaluate your current loan

Start by reviewing your current loan terms, including the balance, interest rate, monthly payment, and remaining term.

Determine if refinancing is worth it—such as if your credit has improved since you first took out the loan or market interest rates have dropped. Check whether your existing loan includes a prepayment penalty, which could add 1% to 2% of your remaining balance to the costs.

2. Shop around

Compare offers from top auto refinance lenders to see what terms you qualify for. Prequalification with multiple lenders can help you understand potential interest rates, monthly payments, and fees, like application fees ranging from $20 to $100. Be sure to look for lenders that keep costs low or offer no-fee refinancing options.

3. Submit an application

Once you’ve chosen the best lender, complete your application online or at a branch. This step typically requires information about yourself, your vehicle, and your current loan, including the lender and payoff amount. Be prepared for potential fees at this stage, such as an application fee or administrative fee.

4. Close the deal

If approved, you’ll receive final loan terms to review. Confirm the title transfer fee and any state-mandated costs, such as a registration fee for updating your vehicle’s records. After signing, the new lender will pay off your old loan and set your first payment due date.

Continue paying your current lender until you receive confirmation that the loan is fully paid off to avoid late fees during the transition.

By understanding how fees fit into each step of the refinancing process, you can make a more informed decision and maximize potential savings. Remember, it’s not just about finding the lowest rate—it’s about balancing the total costs and benefits of the new loan.

Should you refinance your auto loan?

Refinancing has several clear benefits, but it’s important to evaluate your situation and options to determine whether it’s the right move for you. Use the table below for a quick summary:

When you should refinance	When you shouldn’t refinance
✅ You can get a lower interest rate	❌ The potential savings are insufficient
✅ You can’t afford your current payment	❌ You’re almost finished repaying your loan
✅ Savings outweigh the costs	❌ Your vehicle is older or has high mileage
✅ You need access to cash with a cash-out refinance

✅ You can get a lower interest rate

If you qualify for a lower interest rate than you’re currently paying, refinancing can reduce your monthly payment and total interest costs. This often happens if your credit score has improved since you first took out the loan or if market rates have decreased.

✅ You can’t afford your current payment

Even if you don’t qualify for a better interest rate, refinancing can help by extending your loan term, reducing your monthly payments to fit your budget. However, keep in mind that this may increase the total interest paid over the life of the loan.

✅ Savings outweigh the costs

Refinancing is a good idea if the savings you gain from lower monthly payments or reduced interest costs exceed the upfront fees involved. Use an online auto refinance calculator to compare potential costs and benefits.

✅ You need access to cash with a cash-out refinance

If your vehicle is worth significantly more than the remaining loan balance, a cash-out refinance could provide access to funds for other financial needs. However, this increases your loan balance and may extend the time needed to pay it off.

❌ The potential savings are insufficient

If you don’t qualify for a lower interest rate or if fees outweigh the benefits, refinancing may not be worth the effort. Carefully analyze the numbers before moving forward.

❌ You’re almost finished repaying your loan

If you’re close to paying off your current loan—say, with only a year or two left—it often makes sense to stick with your current lender. The benefits of refinancing may not justify the time and costs involved.

❌ Your vehicle is older or has high mileage

Refinancing can be difficult if your vehicle is more than 10 years old or has over 100,000 miles. Many lenders have restrictions on refinancing older or high-mileage vehicles, making it harder to find suitable terms.

If interest rates are high, or your financial condition or credit has not improved since the loan originated, I do not recommend refinancing. This would be an ideal time to improve your credit history and score to be ready to refinance your vehicle when interest rates drop.

Even if your credit and financial condition have improved, with the projected lower interest rate environment in what will ideally be the near future, it could benefit you to wait until that opportunity presents itself.

Erin Kinkade, CFP®

Where do you refinance your auto loan?

Several types of financial institutions offer auto refinance loans, including banks, credit unions, online lenders, and online marketplaces. Understanding your options can help you determine the best path as you assess the cost of refinancing:

• Banks: Banks don’t have membership requirements to get approved, and if you prefer in-person service, you can get it from a local branch. However, traditional banks may charge higher interest rates and fees.
• Credit unions: Credit unions are not-for-profit organizations, so they can typically offer lower interest rates and few or even no fees. They also tend to offer superior services to banks. However, they may require you to meet certain criteria to become a member and qualify for a loan.
• Online lenders: With no physical locations to support, online lenders often have a low-cost model that allows them to offer low interest rates and fees. In some cases, they can even beat out credit unions, but you’re unlikely to get in-person service.
• Online marketplaces: Auto refinance marketplaces are platforms that partner with various lenders, allowing you to compare multiple offers in one place. They can save you time during the comparison process and give you a better chance of getting a solid deal. However, they don’t work with all lenders, so you’re not guaranteed to get the absolute best deal available.

Shopping for an auto refinance loan can be an overwhelming process. To help you get started, check out our picks for the best auto loan refinance companies below and visit our full guide to learn more about each lender and how to choose the best one.

FAQ

Does it cost money to refinance a car?

Yes, refinancing a car comes with costs. As the borrower, you will encounter charges, such as origination, lienholder, and state reregistration fees. Some lenders may charge these as separate fees, making them easier to track.

What is the downside of refinancing a car?

Refinancing a car may lower monthly payments, but an extended loan term may result in higher total costs over the life of the loan due to accrued interest. Potential fees related to the refinance process may also outweigh the potential savings.

Does car refinancing hurt your credit?

Applying for refinancing will result in a hard inquiry on your credit report, which can lower your credit score by a few points. However, consistent on-time payments post-refinance may, over time, contribute to an improved credit score.

Will I save money if I refinance my car?

This depends on several factors, including the current interest rate, the new proposed rate, the remaining loan term, and the total cost of refinancing. It’s important to evaluate all these factors against potential savings before deciding to proceed with refinancing. Remember, the aim of refinancing should be to reduce your overall financial burden.