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If you are the owner of a car loan, you may be used to a pre-approved refinance offer, either in your email inbox or even your actual mailbox. In many cases, banks and credit unions house checking or savings accounts and track credit scores. They know you well and are committed to refinancing your car loan for a lower fee.
Macroeconomics of today – thanks to rising levels of consumer debt, potential reversals of inflation, and whispers of a recession thanks to tariffs, you listen to their pitch. Perhaps you’ll even wonder if you can refinance your car loan and pay off other debts with reduced costs. After all, car loan fees generally tend to be much lower than the APRs of other consumer loans.
| product | Terminology (year) | Average interest rate* |
| Car loan (new car) | 5 | 8.04% |
| Personal loan | 2 | 11.66% |
| Credit Card | n/a | 21.37% |
| *From the commercial bank in February 2025 Federal Reserve System | ||
Similar to cash-out mortgage refinance, cash-back car loan refinance means borrowing from stocks established on the vehicle to repay the original car loan and other obligations.
“From the data we see, the average refinance saves consumers around $60 a month on monthly payments. That certainly helps to cover other bills,” says Melinda Zabritski, head of automotive insights at Experian. “But I think that’s important too… just to consider more than just saving monthly payments.”
Does cashback car refinance mathematics make it worth it?
According to Experian figures, let’s say you originally got an average car loan in January 2023. $40,484 will be repaid over six years at a 7.16% interest rate.
Also, let’s assume you’ve been running around for 28 months (until April 2025) while building up about $13,000 in stock.
| Original loan | Current loan | |
| Loan amount | $40,484 | $27,291 |
| Repayment period | 72 months | 44 months |
We are currently considering several refinance offers to help you consolidate and clear $10,000 in credit card debt (average interest rate of 21% north).
| Current car loans | Credit card debt | Refinance offer 1 | Refinance offer 2 | |
| amount | $27,291 | $10,000 | $37,291 | $37,291 |
| Repayment period | 44 months | rotate | 48 months | 72 months |
| interest rate | 7.16% | twenty one% | 5% | 7% |
| Monthly payment | $693 | As much as possible | $859 | $636 |
| Total Interest Cost | $3,909 | eek | $3,931 | $8,485 |
| Total repayment cost | $31,200 | who knows? | $41,222 | $45,776 |
| Free use calculations Loan Payment Calculator | ||||
If you’re really struggling to keep up with your credit card debt, it may seem like 1 (in a shorter period) is not easy. After all, you’ll probably pay that debt with 5 or 7 percent interest, not more than 21 percent.
However, keep in mind that determining whether cashback car refinance is the right strategy is not that easy. You should also consider the interest costs associated with extending the loan term.
Think about that…
- Provided by 1 The loan period will be extended by four months. But thanks to lower interest rates and increased monthly payments (actually $166 more), it only increases the overall interest cost by $22 (compared to current car loans).
- Offer 2 Add 28 months to your existing car loan term. Also, longer repayments increase the overall interest expense by $4,554. Still, it may be appropriate if you want to cut your monthly payments (in fact it’s $57 less than your current car loan).
If these hypothetical offers still sound attractive, be careful. There are additional layers to spread out.
Questions to consider before choosing to refinance your cashback
How fair is your car?
Cash-out (or cashback) car loan refinance is very useful only if you have a good ownership of the vehicle. That’s because it’s your fairness that you can borrow more and redirect the funds to other debts.
In the example above, we assume that the fictitious borrower has repaid about 33%. The more fair you have, the better you will (in every respect).
Do you plan to maintain your car?
For discussion, let’s say you are intrigued by Offer 2 (above). However, if you go on this route, it is very likely that the wheels are borrowing more than worth it.
| It was carried out with an original car loan | Refinance offer 2 | Total repayment | |
| amount | $13,193 | $37,291 | $50,484 |
| Repayment period | 28 months | 72 months | 90 months |
| Total Interest Cost | $3,909 | $8,485 | $12,394 |
| Total repayment cost | $17,102 | $45,776 | $62,878 |
If you are planning to keep your car, and at least confident as you are – it may not matter if it is in good working condition and is confident that it will not fall apart tomorrow. However, if you are considering selling or trading your vehicle in the near future, refinancing for a larger loan amount will be difficult.
How much is your car worth?
Just because you’re happy with the chance of being underwater on a refinanced car loan doesn’t mean your lender will. In fact, they usually limit the amount that can be borrowed to the market value of the vehicle.
In this example, refinance may be possible only if, at least, your vehicle is worth (or ideally more) your desired loan amount.
Can I get a lower car loan interest rate?
If your credit has improved since you last borrowed, you may be in a position to grab a lower car loan refinance rate than your current APR. Otherwise, higher fees will be digged into your potential savings from consolidating other debts.
“We’d certainly expect more (refinances) to occur if the rate drops,” says Zabritski of Experian.
Will refinanced car loans have less interest overall?
Let’s assume you’re intrigued by refinancing. You need to ask yourself whether you want to pay less interest by consolidating or separating your credit card debt.
You can look up and look up your budget and credit card payoff calculator.
| If you are merging refinance and debt, offer 2… | If you are stuck on your original car loan… | If you’re stuck with your credit card debt… | |
| Total Interest Cost | $12,394 | $9,436 | Over $2,958? |
What is your next step?
You may need to choose which debt to pay off first. That’s because it’s easier than saying that repaying multiple debt accounts at the same time. Cashback car loan refinance is one way to do that, but it’s far from the perfect solution for everyone. Consider other debt repayment strategies to help zero out the best plan for your situation.
