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

The Car Refinance Break-Even Calculator helps determine how many months it will take to recover the closing costs of refinancing your auto loan through the monthly payment savings.

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 offset the upfront refinancing 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 associated with refinancing, your current payment, and proposed new payment. The calculator assumes you'll keep the vehicle long enough to reach break-even.

5. Frequently Asked Questions (FAQ)

Q1: What counts as closing costs?
A: Include all fees - loan origination fees, title transfer fees, documentation fees, and any other charges from the lender.

Q2: What's a good break-even point?
A: Generally, refinancing makes sense if you'll keep the car longer than the break-even period. Under 12 months is usually excellent.

Q3: Should I include prepayment penalties?
A: Yes, if your current loan has prepayment penalties, include them in the closing costs.

Q4: What if my new payment is higher?
A: The calculator will show "Never" since refinancing to a higher payment doesn't have a break-even point.

Q5: Does this account for interest savings?
A: Indirectly - the payment difference reflects both principal and interest changes from the new loan terms.