RateGenius, a fintech company with a proprietary consumer-lending platform, released its annual study revealing the current state of the auto refinance market for 2021, finding that savings are at a historical high and interest rates are the lowest they've been in years, with the current state of the economy driving demand in 2020 leading into 2021.
"Last year was a difficult one for consumers across the country," said RateGenius CEO Chris Speltz. "While it's not surprising that borrowers who refinanced saved money on their auto loans and lessened their overall debt burden, what our analysis found was that changes in consumer behavior as a result of the pandemic---such as fewer miles driven and choosing to purchase used cars over new---had an overall positive impact on vehicle collateral values, loan approvals and savings in 2020."
The report provides an analysis of more than half a million anonymized customer auto loan refinance applications from 2019 to 2020, examining interest rates, savings, credit scores and debt-to-income ratios by vehicle type and geographical region.
Report findings include:
Current Savings Are The Highest On Record
- Americans saved an average of $989.72 a year on refinancing their car in 2020, the largest amount since 2016.
- 42% of successful refinancing applications saw annual savings of $1,000 or higher.
- With an average interest rate of 10.5% on their existing loans, the average interest on the refinanced loan was 5%---the greatest interest rate reduction in eight years.
Pandemic Economy Drove Demand for Auto Loan Refinancing
- 16% more Americans applied to refinance their auto loans in 2020 than in 2019.
- As many as 17% more borrowers successfully refinanced their car loans in 2020, compared to 2019.
- On average, Americans who applied to refinance their auto loans did so only 14.5 months into their existing loan---the shortest time on record.
- In 2020, the Federal Reserve's interest rate, which influences auto rates, was below 0.1% throughout most of the year; it's the lowest it's been in nearly a decade.