As interest rates continue to go down, you can refinance your car loan and lower your payments. Refinancing your auto loan is much easier than refinancing your home because there is little or no cost involved.

Are You a Good Candidate?
If you have had your loan for a short time (less than half of the term) and you can lower your rate at least 1.5 percent, refinancing is a good idea. Be careful not to obtain another auto loan for the same length of time as the original loan—you would pay more in interest charges than you were on the original loan. For example, if you had a 60-month loan and you were one year into it, you would shop for a loan with a 48-month or a 36-month term.

Shop for a Better Loan
Be on the lookout for fees when shopping for an auto loan. States charge from $4 to $40 for changing the name of the lender on a car's title. Some lenders absorb that cost and others pass it on to customers in processing fees.

Before you start shopping for a better loan, make sure your original is a simple-interest loan and there are no prepayment penalties

Rule of 78s
If you've signed on for a pre-computed loan (usually offered by second-rate lenders), there's a good chance your lender will use the "Rule of 78s" formula. It's used to determine the amount of each month's payment into interest and principal. If your lender calculates a "rebate" of finance charges for early prepayment, walk away from the loan. This rebate is actually a prepayment penalty, which you shouldn't have to pay.