1. What is Auto Refinance Break-Even?

The break-even point in auto refinancing is the number of months it takes for your monthly savings to equal the closing costs of refinancing. It helps determine if refinancing makes financial sense for your situation.

2. How Does the Calculator Work?

The calculator uses the break-even formula:

Where:

• \( Closing\ Costs \) — Fees associated with refinancing (USD)
• \( Old\ PMT \) — Original monthly payment amount (USD)
• \( New\ PMT \) — New monthly payment amount after refinancing (USD)

Explanation: The equation calculates how many months of payment savings are needed to recover the upfront refinancing costs.

3. Importance of Break-Even Calculation

Details: Calculating the break-even point helps you determine if refinancing makes sense based on how long you plan to keep the vehicle. If you plan to keep the car longer than the break-even period, refinancing may be beneficial.

4. Using the Calculator

Tips: Enter all costs in USD. Ensure your new payment is less than your old payment for the calculation to be meaningful. The calculator assumes you'll keep the same loan term.

5. Frequently Asked Questions (FAQ)

Q1: What's a good break-even period?
A: Generally, a break-even period under 12-18 months is considered good, but this depends on how long you plan to keep the vehicle.

Q2: What costs should be included in closing costs?
A: Include all fees: loan origination fees, title transfer fees, registration fees, and any other refinancing-related charges.

Q3: Does this account for extended loan terms?
A: No, this simple calculator only compares monthly payments. Extending your loan term may lower payments but increase total interest paid.

Q4: Should I refinance if I'm close to paying off my loan?
A: Probably not, unless the savings significantly outweigh the costs before payoff.

Q5: How accurate is this calculator?
A: It provides a basic estimate. For precise numbers, consult with your lender and consider all loan terms.