Top 5 Misconceptions About Refinancing a Car

When was the last time you wished your car payment could be just a little lower each month? Saving $50 to $100 each month on your car payments adds up. According to a 2020 auto loan refinancing study, the annual savings for car owners by refinancing was around $990. That breaks down to about $83 a month.

With low interest rates, refinancing might be a great way for you to save money on your payments.

What is auto loan refinancing?

When you refinance your auto loan, you’re taking out a brand new loan to pay off your existing loan. Since the goal of a refinance is usually to save money, the new loan’s interest rate should be less than what you’re paying now.

Because refinancing requires you to take out a new loan, the process is similar to applying for other types of loans, such as a personal loan. This means your credit score should be in good standing and you should shop around to find the most competitive interest rates.

As you research, be aware of the following misconceptions around auto refinancing. Knowing what to expect and understanding what refinancing entails are the best ways to set yourself up for success and ultimately, save money.

Here are common misconceptions about refinancing a car.

Misconception #1: Auto refinancing requires a time-consuming appraisal

Whenever you resell, trade in, or refinance your car, it’s always a good idea to understand the value of your car so you know whether you’re getting a good deal. Since a refinance requires a brand new loan, you will need to get your vehicle appraised because it is an important factor when determining the rate of your new loan.

However, appraisals are usually quick and easy thanks to a number of online auto resources that make the process fast and efficient. Your refinance lender may take care of this on their end. They will assess the vehicle’s age, mileage, make, year, condition, and history.

Misconception #2: Refinancing is a hassle

Getting the best deal on refinancing your vehicle will require effort and research on your part, but lenders also help with the process to make it easier for you.

For example, you may have heard refinancing requires you to go to the DMV, but similar to getting an appraisal, the lender may cover this for you.

In general, refinancing requires a few simple steps. Here’s what you can expect when you refinance:

Pre-qualification: Check your rate to see if you pre-qualify. Your credit score won’t be impacted if it’s a soft inquiry.
Credit application: Once you submit the full application, a hard credit inquiry will be posted on your credit report.
Finalize: Submit any final documents, such as the title transfer, which varies by state.

Misconception #3: Refinancing has too many fees

Because the whole point of refinancing is to save you money, there are minimal fees involved. These can include a lien holder and state re-registration fees, which aren’t too expensive and depending on your lender, will be handled for you during the refinance process.

One important fee to note—before you refinance, make sure there is no prepayment penalty fee for your current loan. This is a fee that some lenders charge if you pay off your loan earlier than the agreed upon terms.

Misconception #4: After purchasing your car, you need to wait in order to refinance

This is not true—you can actually refinance immediately after you purchase your vehicle. You can even refinance before you make your first car payment.

The most important thing to remember is that refinancing should put you in a better position with a lower interest rate, and shouldn’t add more to the total cost of your vehicle.

One reason you may consider waiting at least six months to a year to refinance is to give your credit score a chance to bounce back. If your credit is poor and needs improvement, it makes sense to build a solid payment history before applying for another loan.

Your vehicle must be:

Less than 10 years old
Under 120,000 miles
Insured as a personal car

And if your current loan must have:

An outstanding balance of $9,000 to $60,000
Been initiated at least one month ago

Misconception #5: Refinancing hurts your credit

While it’s true you may experience a dip in your credit score after a hard credit pull is made, keep in mind this is usually temporary. This kind of inquiry typically stays for about two years and may not negatively impact your credit history in the long run.

The good news is, credit inquiries for auto loans are bundled as a single inquiry within a specific time frame. For example, VantageScore gives you a rolling 14-day period while FICO gives you 45 days.

Shop around for the best rates

Compare the best rates from online lenders to see how much you can save over the life of your loan.

Upstart Network, Inc. (NMLS #936133) is not a lender. All loans on its marketplace are made by regulated financial institutions.

All mortgage lending is conducted by Upstart Mortgage, LLC dba Upstart Home Lending. (NMLS #2443873). Equal Housing Opportunity.

Checking your rate won’t affect your credit score: When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information may be reported to the credit bureaus.
Upstart’s model considers education: Neither Upstart nor its lending partners have a minimum educational attainment requirement in order to be eligible for a loan.
41% more approvals and 33% lower rates than a traditional model: As of publication in April 2026, and based on a comparison between the Upstart model and a hypothetical traditional model using Upstart data from Jan – Dec 2025. For more information on the methodology behind this study, please see Upstart’s Annual Access to Credit results here.
Unsecured Loans: While most loans through Upstart are unsecured, certain lenders may place a lien on other accounts you hold with the same institution. There may be an option to secure your personal loan through Upstart with your vehicle, which will require a lien to be placed on the vehicle. It is important to review your promissory note for these details before accepting your loan.
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APRs from 6.2% – 35.99%, with 3 or 5 year terms: The full range of available rates varies by state. The lowest rates are only available to the most qualified applicants. A representative example of payment terms for an unsecured Personal Loan is as follows: a borrower receives a loan of $10,000 for a term of 60 months, with an interest rate of 17.50% and a 7.25% origination fee of $725, for an APR of 21.23%. In this example, the borrower will receive $9275 and will make 60 monthly payments of $252. APR is calculated based on 5-year rates offered in March 2026. There is no downpayment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.
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HELOC APRs as low as 6.52%: Terms shown here are subject to change without notice. APRs for initial advances range from 6.52% to 18.00% based on rates offered as of April 2026. The lowest rate is only available to consumers willing to become a member of a credit union and to those who meet a minimum FICO score of 780, CLTV under 70%, and DTI under 45%. Your actual rate will depend on many factors such as your credit history, combined loan-to-value ratio (CLTV), line amount, loan term, lien position, and property state. Origination fee to open an account is between 0% and 4.99% of the approved credit limit. The Annual Percentage Rate (“APR”) is variable and based on the Prime Rate as published in the Wall Street Journal “Money Rates” table plus or minus a margin. Your APR will never be less than 3.99% or greater than 18.00%. Property insurance is required.
No annual fee, prepayment penalty, or fees to redraw: Terms shown here are subject to change without notice. Origination fee to open an account is between 0% and 4.99% of the approved credit limit. The Annual Percentage Rate (“APR”) is variable and based on the Prime Rate as published in the Wall Street Journal “Money Rates” table plus or minus a margin. Your APR will never be less than 3.99% or greater than 18.00%. Property insurance is required.
2,500+ Variables:As of 3/31/2026. “Variables,” often also referred to as “features,” refers to raw variables and combined variables considered in our AI models. A “raw” variable is a non-combined, conceptually distinct unit of data, such as “applicant-reported savings.” A “combined” variable is data that has been transformed, combined, or otherwise engineered from a raw variable or set of raw variables, such as “applicant-reported savings” divided by “loan amount.
Fully automated loans: In Q2 2026. Percentage of Loans Fully Automated, which is defined as the total number of loans in a given period originated end-to-end (from initial rate request to final funding for personal loans and small dollar loans, and from initial rate request to signing of the loan agreement for auto loans) with no human involvement required by the Company divided by the Transaction Volume, Number of Loans in the same period.