Auto refinance: payment savings versus actual cost

A lower payment, fee allocation and an equal-date payoff comparison answer different questions.

Start with the debt that is being replaced

Use current payoff information and remaining term. Do not reuse the original purchase principal. Separate a penalty from the payoff only when it is not already included. Read the contract before treating a refinance as free of exit costs.

Put every fee in one place

A cash fee is paid at the start. A financed fee increases the new loan balance and can accrue interest. Entering the same charge in both fields overstates the replacement cost.

Compare the date when you may sell

A 24-month loan and a 60-month loan can have very different remaining balances after one year. Cash paid plus the debt still owed provides a same-month comparison. Full-term cash answers another question and uses each loan’s own payoff date.

Inspect reversals, not only a first crossing

A near-term advantage can disappear later. The downloadable table lists every comparison month. This model uses monthly periodic interest; actual daily-interest payoff figures and refunds may differ.

Compare current and replacement loans. Background: CFPB on prepayment charges when refinancing.