How to Refinance a Car Loan When Your Payment Is Too High

Car repossessions hit their highest level since 2009 last year1.73 million vehicles were taken back by lenders. That's according to recent CNN reporting on what economists are calling a troubling sign for Americans struggling with high-interest auto loans.

If your car payment is eating up too much of your budget, you're not imagining it. Average monthly payments now exceed $750 for new cars, and nearly one in five borrowers is paying over $1,000 a month. When you factor in insurance (up 19% in the last year) and maintenance costs, keeping a vehicle has never been more expensive.

But you may be able to improve your auto loan situation: you can refinance a car loan the same way you'd refinance a mortgage. And right now might be the perfect time.

What Does It Mean to Refinance Car Loans?

When you refinance a car loan, you're essentially replacing your current loan with a new oneideally at a lower interest rate or better terms.

Let's say you financed your car two years ago at 14% interest because your credit wasn't great. You've been making payments on time since then, your credit score has improved, and now you could qualify for 9% or even 7%. That difference could save you thousands over the life of the loan.

Or maybe your credit score hasn't changed much, but you're paying 16% when the current market rate for your credit tier is closer to 12%. Either way, when you refinance your car, you're getting a do-over on terms that no longer make sense for you.

How Does Refinancing Work?

The car loan refinance process is actually pretty straightforward:

1. Check your current loan details - Know your interest rate, remaining balance, and how much time is left. Some lenders charge prepayment penalties (though most don't), so you'll want to confirm that too.
2. See what you might qualify for - This is where tools like myAutoloan's advanced loan calculator come in handy. You can estimate what your new payment would be at different interest rates before you even apply.
3. Submit an application - With myAutoloan, one application goes out to multiple lenders. You get up to four offers back, which means you can actually compare options instead of just hoping the first lender gives you a decent rate.
4. Choose your best offer - Maybe one lender offers the lowest rate. Maybe another has better terms or flexibility. You pick what works for your situation.
5. The new lender pays off your old loan - You start making payments to the new lender at your new, hopefully lower, rate.

Is it worth a few minutes of your time to find out?

When Should You Refinance a Car?

Refinancing car loans makes the most sense when:

Your interest rate is high. Anything above 10% is worth investigating. If you're at 15% or higher, you could be leaving serious money on the table every month.

Your credit has improved. Made on-time payments for the last year? Paid down other debts? Your credit score might have jumped 50-100 points, which can qualify you for much better rates.

You're struggling with payments. CNN's reporting highlighted that subprime borrowers are falling behind at rates not seen since the early 1990s. If you're one of them, refinancing could be the difference between keeping your car and losing it.

You got a bad deal initially. Maybe you financed through the dealer without shopping around. Or you needed a car immediately after an accident and didn't have time to negotiate. It happens. But you don't have to stick with bad terms forever.

When Refinancing Might Not Help

Refinancing isn't magic. If you're very late in your loan term (like, final year), the savings might not be worth the effort. And if your credit has actually gotten worse or you're already behind on payments, your options will be limited.

Also, extending your loan term to lower your monthly payment means you'll pay more interest over time. So if you refinance your car from a 4-year loan to a 6-year loan, yes, your monthly payment dropsbut you're making payments for two extra years. Sometimes that trade-off is worth it for breathing room in your budget. Sometimes it's not. You've got to run the numbers.

That's why the calculator is so helpful. You can play with different scenarios and see the total cost, not just the monthly payment.

Why One Application Getting Four Offers Matters

When you're refinancing a car loan, shopping around is critical. Different lenders specialize in different credit profiles and vehicle types. One might give you a great rate but require a shorter term. Another might be more flexible but charge slightly higher interest.

Traditionally, this meant filling out multiple applications. With myAutoloan's approach, you submit once and the offers come to you. It's less hassle, less stress, and lets you pick the best deal.

Frequently Asked Questions About Refinancing Your Car

Your car payment doesn't need to be the thing that keeps you up at night or forces impossible choices between groceries and staying current on bills. With over 6% of subprime borrowers now more than 60 days behind on payments, taking action before you fall into that group is the smartest move you can make.

Use the calculator. See what's possible. Submit one application and compare what lenders are willing to offer you. Maybe you'll save $50 a month. Maybe it's $150. Either way, that's money that stays in your pocket instead of going to interest on a loan you took out when you had fewer options.