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Do you drive one of the most popular vehicles for auto loan refinancing?
2021 was quite the year…for auto loan refinancing. Because that’s what you expected us to say, right?
While the COVID-19 pandemic continued to complicate life and personal finances everywhere, many borrowers took advantage of historically low interest rates and refinanced their auto loans. In many cases, people were able to cut their rates in half. According to the 2022 RateGenius State of Auto Refinance report, borrowers reduce their interest rates by 7% on average when they refinanced.
Since you’re here, chances are you’re curious about auto loan refinancing — and you may want to join the savings bandwagon. So, before we dive into the top 10 most refinanced vehicles in 2021, let’s make sure everyone understands the auto loan refinancing process.
Auto loan refinancing is not as technical or complicated as it might sound. Essentially, it’s the process of replacing your current car loan with a new one. Why go through the lending process all over again? Ideally, your new loan would come with better terms, like a lower interest rate and monthly payment.
For instance, maybe market rates have gone down since you bought your car. Or perhaps you didn’t have the best credit when you first applied. If you’ve improved your credit score or even gotten a raise, you might qualify for some serious savings. Last year, roughly one in five borrowers who refinanced managed to cut their monthly payments by more than $150.
Your actual savings depend on various factors, as well as external forces like lending market competition and the health of the economy (both locally and nationally). But contrary to popular belief, you don’t need a spotless credit profile to qualify for this level of savings.
When people think about qualifying for a loan, their minds typically jump to their credit scores. While this is an important factor, it’s not the only factor. Here’s what you can expect lenders to consider when you apply for auto loan refinancing:
With so many factors at play, there’s no hard-set rule for qualifying. To give you an idea though, the average credit score of borrowers who refinanced last year was 670. Moreover, the average LTV was 93.1%, and lenders typically prefer applicants with DTIs below 50%. Last but not least, the newer your car the better your odds (usually).
Similar to 2020, there was an obvious trend in terms of what vehicle class saved the most money by refinancing last year: pickup trucks.
And it wasn’t particularly close. Refinancing helped truck owners save $131 per month on average. Meanwhile, SUVs finished the year in second place with average monthly savings of $113. Coupes and sports cars came in third (averaging $103 per month).
Now, without further adieu, let’s get to the list.
Photo Credit: Carmax.com
If your vehicle made the 2021 Top 10 Most Refinanced Vehicles list, congrats! You may be chomping at the bit to see if you can secure savings. However, if your vehicle didn’t make the cut — don’t fret. Borrowers saved $1,156 per year on average by refinancing last year, regardless of vehicle model.
Considering the Federal Reserve has contemplated three or four interest rate hikes this year, now wouldn’t be a bad time to apply. Going forward, it’s reasonable to expect auto loan rates to rise in conjunction with the Fed’s rate movements.
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