1. What is the Car Refinance Break-Even Point?

The break-even point represents how many months it will take for your refinancing savings to cover the closing costs of the new loan. After this point, you begin saving money each month.

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 (USD)

Explanation: The equation calculates how many months of payment difference it takes to recover the closing costs.

3. Importance of Break-Even Calculation

Details: Knowing your break-even point helps determine if refinancing makes financial sense, especially if you plan to keep the vehicle for a limited time.

4. Using the Calculator

Tips: Enter all costs in USD. Ensure your new payment is less than your old payment for refinancing to make sense.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good break-even point?
A: Generally, less than 18-24 months is considered favorable for auto refinancing.

Q2: What costs should be included in closing costs?
A: Include all fees - loan origination fees, title fees, registration fees, and any prepayment penalties.

Q3: Should I refinance if I'm close to paying off my loan?
A: Probably not, unless the savings are substantial enough to justify the costs before payoff.

Q4: Does this account for differences in loan terms?
A: No, this simple calculation only compares monthly payments. A full analysis should consider total interest paid over the life of both loans.

Q5: What if my new payment is higher?
A: The calculator won't show a break-even point because refinancing would cost you money each month.