Drivers eye relief with possible auto loan refinancing

Historically, as the Federal Reserve's benchmark rate drops (as it did in Sept.), so do auto loan rates… eventually, but It won’t happen overnight. And so far into Nov., auto rates haven't materially changed. But there are whispers that another Fed cut is right around the corner, and millions of people who financed cars at severely high interest rates will look to refinance.

Driving the news: According to a recent survey by TransUnion, the majority of respondents are eager to explore auto loan refinancing for better terms and monthly payments.

• 76% of those surveyed are interested in refinancing.

• 65% of survey participants say that they agree or strongly agree that their current monthly auto payments are straining their budgets.

• 52% of respondents said they would consider refinancing if it would save them between $50 and $149 monthly.

What they’re saying: “A payment that can be refinanced if the economic climate allows for it, and as interest rates begin to fall, this group of consumers should begin exploring this option. Conversely, lenders should be actively marketing to these refinance candidates, regardless of what their primary motivation to refinance may be,” said Satyan Merchant, senior vice president and mortgage and auto business leader for TransUnion.

Easier said than done: There are layers of complexity to refinancing a car and 19% of survey participants admitted they didn’t even know refinancing was an option. 

• Prime borrowers, those with good credit standing, have the best shot at refinancing, as lenders see them as lower risk. Conversely, subprime borrowers are at higher risk, making refinancing approval tougher.

• Refinancing later in an auto loan may not be cost-effective — early payments in the loan term are mostly interest, so borrowers might end up paying more in the long run if they refinance.

• Borrowers further into their loan are more likely to be “upside down,” owing more than the car’s value, which complicates refinancing as lenders fear they can’t recover the full loan amount if there’s a default.

Bottom line: Refinancing offers potential relief for consumers facing high auto payments. But it’s not a one-size-fits-all solution — timing, understanding loan terms, and evaluating individual financial circumstances are crucial. For now, it’s a waiting game but a promising one for those watching for a break.

Become an automotive insider in just 5 minutes.

Get the weekly email that delivers transparent insights into the car market.

Join 84,000 others now, it's free:

Gain a Competitive Edge with Overfuel

Overfuel helps car dealers build modern websites designed to win customers and drive business.

Whether you're a franchise or independent, Overfuel.com offers a major advantage over outdated website providers; unlocking the latest SEO strategies and meeting Google's performance standards (a key metric most dealer sites fail.)

That's why Overfuel has been proven to boost website visitor conversions by an average of 49.3%.

Take the lead over your competition. Sign up for a free website audit at Overfuel.com/audit.