In the simplest terms, refinancing an auto loan means replacing the terms of your current auto loan with new terms, ideally at a lower interest rate. For example, switching to a shorter repayment period could increase your monthly payments as you'll have fewer months to repay the total loan, while decreasing your interest rates or extending the length of your loan will likely reduce the total monthly payment. Original loan, final 60 months Refinanced loan, 60 months Remaining loan balance $21,478 $21,478 Remaining payments 60 months 60 months Interest rate 6.5% APR 3.0% APR Monthly payment $420 $386 Total cost $25,215 $23,156 Interest paid $3,737 $1,678