1. What is the Auto Loan Refinance Break-Even?

The break-even point represents how many months it will take for your monthly savings to cover the costs of refinancing your auto loan. It helps determine if refinancing makes financial sense.

2. How Does the Calculator Work?

The calculator uses the break-even formula:

Where:

• \( Closing\ Costs \) — Fees associated with refinancing (USD)
• \( Old\ PMT \) — Your current monthly payment (USD)
• \( New\ PMT \) — Your new monthly payment 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 determine if refinancing is worthwhile based on how long you plan to keep the vehicle. If you'll own the car longer than the break-even period, refinancing may save you money.

4. Using the Calculator

Tips: Enter all closing costs associated with refinancing, your current monthly payment, and your proposed new monthly payment. All values must be positive numbers, and the new payment must be less than the old payment.

5. Frequently Asked Questions (FAQ)

Q1: What counts as closing costs?
A: Includes loan origination fees, title fees, documentation fees, and any other upfront charges to refinance.

Q2: What's a good break-even period?
A: Typically, refinancing makes sense if break-even is less than 12-24 months and you'll keep the car longer.

Q3: Does this account for loan term changes?
A: No, this only compares monthly payments. A longer term may show savings but cost more overall.

Q4: Should I include prepayment penalties?
A: Yes, if your current loan has prepayment penalties, include them in closing costs.

Q5: What if my new payment is higher?
A: The calculator requires new payment to be lower than old payment, as refinancing to a higher payment rarely makes sense.