The number of consumers who refinanced their auto loans last quarter surged 69% against last year as consumers finally got (some) relief from elevated interest rates. But not all borrowers are benefiting equally from this refinancing boom.
By the numbers: According to Experian's Q2 2025 State of the Auto Finance Market report, consumers who refinanced their car loans during the quarter dropped their average rate loan from 10.45% to 8.45%.
That's a full two percentage points lower, and translates to roughly $71 less per month.
A year ago, auto loan refinancers only saved 0.93% on their rates, with average rates dropping from 10.54% to 9.60%.
Why it matters: A spike in auto loan refinancing is good news for consumers because it often lowers monthly payments, and frees up cash over time. But it can come at a cost for dealers. Refinancing often keeps consumers in their existing vehicles longer, delaying new or used car purchases and possibly reducing dealership sales.
Zooming in: Auto loan borrowers are finding the most refinancing relief with credit unions, saving $87 versus just $46 for those who went with banks.
It's not a surprise to learn then that credit unions captured 68% of the refinancing market, up from 63% last year, while banks slipped from 23% to 21%.
Meanwhile, auto-finance focused companies only offered average savings of $13.
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Worth noting: Banks aren't losing market share without a fight. For example, Chase Bank is now letting consumers with auto loans from any non-Chase lender apply online to refinance through Chase, even if they aren’t existing Chase customers.
But between the lines: The refinancing boom isn't evenly distributed among credit tiers.
Prime borrowers make up 52% of refinancing volume despite representing only 35% of outstanding auto loan balances.
Super prime borrowers account for another 17% of refinances while holding 34% of balances.
Subprime borrowers represent 19% of outstanding balances but only 12% of refinancing activity.
Basically, if you have good credit, you've got options. If you don't, you're mostly stuck.
What's next: More demand for refinancing is likely on the horizon. J.P. Morgan forecasts a rate cut from the Fed Reserve in September with three more 25-basis-point reductions by early 2026. Michelle Bowman, a top official at the Federal Reserve also said that a recent, weaker-than-expected report on the U.S. job market supports three additional rate cuts.
What they’re saying: “Although affordability continues to be a topic of conversation in the automotive industry, with interest rates trending downward, we’re seeing more borrowers taking the opportunity to lower their monthly payments,” said Melinda Zabritski, Experian’s head of automotive financial insights. “Banks and credit unions remain key players in the auto refinancing space, offering a range of options that may help borrowers secure better terms.”
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