Is refinancing a car loan worth it for a small rate drop?

The clean way to compare is to keep the term the same (36 months) and see how much total interest you'd save. Call your current lender for the exact payoff and use your current monthly payment to find remaining interest: payment x 36 - payoff. Ask the new lender for a 36-month quote on a principal equal to that payoff (plus any fees you roll in), then compute new interest: new payment x 36 - new principal. Savings = old interest - new interest - any fees you pay out of pocket; if that number is tiny or negative, skip it. Quick rule of thumb: a 0.7% APR drop over three years saves roughly 1% of your current balance in interest, so you need a fairly big balance for it to matter. For example, if you owe $20,000, you'll save only about $200 total; if fees are $300–$500, it's a net loss.

Watch for gotchas: don't extend the term unless you need the lower payment, because that can increase total interest even at a lower rate. Ask about all fees (origination, title/DMV, lien release, overnight payoff) and whether your current loan has any prepayment penalty or per-diem interest you'll pay twice if the payoff date slips. If you have GAP or an extended warranty financed in the old loan, cancelling after payoff may get you a prorated refund, and you'll need to decide if you want new GAP on the refi. Rolling fees into the new loan reduces the small savings and can put you upside-down; paying them cash preserves any benefit. If you plan to sell or pay off early, the savings shrink further because you won't collect the later interest reduction, so a small rate drop often isn't worth the hassle.

Call for an official payoff quote; use that number, not your statement balance. Compute remaining interest at 7.2% versus a new 6.5% loan for the same 36 months; include every fee, and if fees are rolled in, include interest on those too.

Check for prepayment penalties, Rule‑of‑78s/precomputed interest, title/registration fees, GAP or warranty resets, hard credit pull, and autopay discount requirements; do not extend the term. Only worth it if savings comfortably exceed all costs without adding months.

I'd run it in a free spreadsheet and skip any paid calculators. In LibreOffice or Google Sheets: grab your payoff, then compare PMT(0.072/12, 36, -balance) vs PMT(0.065/12, 36, -balance); total interest is payment*36 minus balance—subtract fees and that's your break‑even. I did this on my old hatchback and a 0.6% drop only saved like 80 bucks total, so I walked and kept my cash.

With only 36 months left, a 0.7% drop is usually lunch‑money savings unless fees are basically zero and you keep the same term. Get your exact payoff, compare total interest remaining at 7.2% vs 6.5% over 36 months, then subtract every fee (and the interest on any fee you roll in).

If the net isn't clearly positive, pay extra principal instead. Watch for the classic gotcha: they stretch you to a longer term to fake a smaller payment.