News & Resources

Auto refinancing provides benefits for consumers

Aug 03, 2012 Philip Burgess

Auto loans provide consumers with a method of obtaining vehicles for everyday use. When it comes to refinancing these loans, however, many consumers know the benefits the option offers, although only a few take advantage of it. Additionally, car loans are on the rise as lenders increasingly look at alternative credit data to lend money to subprime borrowers. A recent survey by revealed that only 12 percent of respondents have ever refinanced a car loan, depsite being aware of the benefits it offers by saving money. However, around 63 percent said they knew about the option of auto refinancing. When it comes to the advantages of applying for loan refinancing, respondents were evenly split regarding the most benefits deemed most important. Lowering monthly payments, paying off owed amounts sooner and decreasing the interest rate were all considered major advantages by 33 percent of consumers. Another survey by FICO found that auto lenders are optimistic about the future of lending, with half of respondents stating they believe conditions will improve for subprime consumers in 2012. More than three-quarters expect the delinquency rates to either stay the same or decrease over the next six months. "We are clearly seeing a loosening of credit in the auto finance market, with lenders responding to increased consumer demand," said Dr. Andrew Jennings, chief analytics officer at FICO. "This is good news for car dealers and it should help the auto sector continue its recovery."