Car Loan Refinance Calculator: Monthly Payment Formula

A car loan refinance calculator estimates your new monthly payment from the amount refinanced, the new APR, and the loan term. Enter those figures to see the payment and estimated total interest; use your lender’s payoff quote and fee details for a closer comparison.

Formula

The fixed-payment loan formula is M = P × r / [1 − (1 + r)⁻ⁿ]. In this calculator, the monthly rate is r = APR / 1200, and the number of monthly payments is n = years × 12. APR is entered as a percentage per year, so dividing by 100 converts it to a decimal and dividing by 12 converts it to a monthly rate.

• M is the estimated monthly payment, in dollars.
• P is the amount refinanced, in dollars. It may be based on the lender’s payoff amount, not the original amount borrowed.
• r is the monthly interest rate as a decimal.
• n is the number of monthly payments.
• APR is the annual percentage rate entered as a percentage.

Estimated total interest is I = M × n − P, using the payment rounded to cents. The formula assumes a constant rate and equal monthly payments. It does not calculate a refinance offer or determine the exact amount a lender will finance.

Worked Example

Using the calculator’s default values: a $20,000 loan amount, 8% APR, and a five-year term:

1. Convert the APR to a monthly decimal rate: r = 8 / 1200 = 0.0066667.
2. Find the number of payments: n = 5 × 12 = 60.
3. Substitute into the payment formula: M = 20,000 × 0.0066667 / [1 − (1.0066667)⁻⁶⁰].
4. The unrounded payment is about $405.53, giving a monthly payment of $405.53 when rounded to cents.
5. Calculate total interest using the rounded payment: $405.53 × 60 − $20,000 = $4,331.80.

The figures are estimates under the stated assumptions. The payment displayed by a lender may differ if its financed amount, APR, payment dates, or rounding method differs.

Assumptions

• The interest rate stays fixed for the full term.
• Payments are equal monthly payments, made at the end of each monthly period.
• Interest is treated as compounding monthly at APR divided by 12.
• Fees, taxes, insurance, vehicle costs, and any other charges are not included unless they are already included in the entered loan amount.

What to Enter for a Refinance

The amount refinanced is often the key figure to check. A lender’s payoff quote can differ from the balance shown on an account because interest may accrue between the statement date and payoff date, and the quote may account for payment timing. Ask the lender for the exact amount it would use. If eligible fees or other amounts are added to the new loan, include them in the amount only when you have confirmed they will actually be financed.

Enter the proposed APR and term from the refinance disclosure or written quote. Do not substitute a rate found elsewhere or assume the APR is the same as a quoted interest rate: the lender’s documents define the figures and any included charges. The calculator accepts APR from 0.01% to 100% and a term from 0.0833 to 50 years; these are input limits for this tool, not statements about available loan terms.

How to Interpret the Payment

The monthly payment is a scheduled principal-and-interest estimate, not the total cost of owning or operating a vehicle. Early payments generally allocate a larger share to interest than later payments because interest is calculated on the remaining balance. Across the full term, the payment multiplied by the number of payments estimates the total paid under the model; subtracting the amount financed gives estimated interest.

A lower payment by itself does not show whether a refinance costs less overall. A longer term can reduce the scheduled monthly payment while increasing the number of months interest accrues. For a useful comparison, calculate the existing loan’s remaining scheduled payments and compare them with the proposed loan’s payments, including any charges that apply. Consider the timing of the payoff and the date the new payments begin; the calculator does not model gaps, overlapping payments, or a one-time payoff transaction.

Common Calculation Problems and Limits

• Using the original loan amount: A refinance usually addresses the current payoff amount, which may not match the original principal or the account’s displayed balance.
• Entering APR in the wrong units: Enter 8 for 8%, not 0.08. The formula divides the percentage by 1,200 to obtain a monthly decimal rate.
• Mixing years and months: This calculator asks for years and converts the term to months. If a lender quotes a term in months, divide it by 12 before entering it.
• Rounding too early: Keep full precision for the rate and formula, then round the payment to cents. Small differences can result from lender rounding and payment schedules.
• Leaving out financed charges: If a charge is added to principal, it can raise both the payment and total interest. The calculator does not identify which charges apply.

This standard formula is for a fixed-rate, fully amortizing loan with equal monthly payments. It does not model variable rates, irregular payment dates, skipped or extra payments, late charges, a balloon payment, or a changing balance from other transactions. A lender’s payoff statement and loan disclosure are needed for exact figures.

Frequently Asked Questions

How do I calculate a car loan refinance payment?
Use M = P × r / [1 − (1 + r)⁻ⁿ], where P is the amount refinanced, r is APR divided by 1,200, and n is the term in months. Round the resulting monthly payment to cents.

Should I use my car loan balance or payoff amount?
For an estimate of a refinance, use the payoff amount the new lender will finance, if known. The displayed balance may not include interest accrued through the actual payoff date or other amounts in the lender’s calculation.

Does refinancing to a longer term always lower the payment?
A longer term generally spreads repayment over more monthly installments in this fixed-rate formula, but the exact payment also depends on the financed amount and APR. More payments can mean more total interest; compare the full payment schedule rather than the monthly figure alone.

Does this formula include refinance fees?
No. It includes only the amount entered as principal, the APR, and the term. If a fee is confirmed as financed, it can be reflected in the principal; other charges and their treatment must be checked in the lender’s disclosure.

Why is my lender’s payment different?
The lender may use a different financed amount, rate, term, payment date, or rounding method, or include charges not entered here. Ask for the payment calculation and the figures used if you need to reconcile the difference.

This result is an estimate; the lender’s disclosure gives the exact figures.

Related

• Used Auto Loan Calculator: 84-Month Payments
• Car Refinance Loan Calculator: Payment and Interest
• Auto Loan Lump-Sum Early Payment Calculator

in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2