Auto-loan rates may be eye-catching, but is refinancing worth it?

Would you refinance your car loan to save a Jackson each month on your payment?

Over time, the savings could add up to a couple of Benjamins for a full year for many car owners. But is it worth it?

Credit unions, as well as some banks, are promoting the idea of car-loan refinancing. It sounds intriguing now that used-car loan rates are at attractive, single-digit lows and people are looking to save some coin wherever they can to cope with gas at almost $4 a gallon and rising food prices.

A few folks may even turn to refinancing the car as a way to tap into the equity there and pay down higher-rate credit-card debt or remodel the house.

Banks and credit unions want you to refinance because they want your business. Think of the car refi as hearkening back to the days when banks handed out free toasters to new customers.

"As any lender today, we're looking for qualified borrowers," said Robert L. Kudla, senior vice president of lending for Co-op Services Credit Union in Livonia, Mich.

Low car-loan rates are eye-catching. But if you're borrowing a few thousand dollars, you are not going to save $50 a month if you refinance.

Take a $10,000 48-month car loan. The payment would drop by about $18 a month if you went to a 4 percent rate from an 8 percent rate.

A few variables will influence the new car-loan rate:

Your credit score. Many times, to get the best rates, you're going to need a score of 720 or higher.

Your car's age. If you're driving a 2003 model, you're looking at a higher rate. But if you've got a 2008 model or younger, you'd get a lower car-loan rate.

Ohio-based Huntington Bank, which is offering refinancing, says its car-loan rates would range from 4.99 percent to 7.99 percent for a five-year car loan on a newer used car; the rates would range from 5.75 percent to 8.74 percent on a 36-month loan for a 2003 model.

"It's all going to depend on the customer's credit score," said Steve Korody, a consumer-loan specialist for Huntington Bank.

Korody noted that some consumers who have 20 percent rates on their credit cards are able to refinance their cars and tap into the equity to pay off credit-card debt at a lower rate. Essentially, you're consolidating credit-card debt on the car.

For the strategy to work, however, Korody said you would need to be disciplined, close a credit card, and not build up more credit-card debt.

These days, some people may have better credit scores or be able to borrow at lower rates than they could a few years ago, during the depths of the recession.

Hank Risley, senior vice president for retail lending for Ionia, Mich.-based Independent Bank, said many were saving about $20 a month or more refinancing car loans.

"Twenty dollars. I guess it's not dinner out for two," he said. But he noted the savings add up and would amount to nearly $1,000 after four years.

How some really save, Risley said, is when they pay off credit cards or other loans at 20 percent or higher after refinancing their car loans at less than 5 percent and borrowing against their cars.

Consumers, obviously, need to realize that the lowest promotional rates won't apply to everyone.

Kudla said a car owner with a loan rate in the range of 5 percent to 7 percent could save money by refinancing now to rates as low as 2.99 percent for some vehicles.

Jeff Meadors, 37, of Howell, Mich., said he refinanced his 2008 Pontiac Solstice "basically to save a buck."

He's not saving a lot of money each month. But he went from the 4.99 percent rate that he got on the used car in October to a rate of 4.74 percent.

And the new loan also enables him to pay the car off more quickly, since he went from a 60-month loan to a 48-month loan in the process.

"I'm just money-conscious," Meadors said. "I hate paying the interest every month."