With interest rates at record lows, banks are seeing more customers applying to refinance auto loans.
Eli Marks, retail and small business credit manager for Wells Fargo’s Southeastern region, said he has seen a significant increase in customers refinancing auto loans as mortgage rates drop.
“Average rates have dropped significantly in the past 10 years, about 3 percent,” Marks said. “That can really make a difference.”
Mary Alice Curry, a Wells Fargo customer from Edgefield, S.C., refinanced her car a few months ago and was able to knock $100 off of her monthly payments. She said she regularly suggests refinancing to friends as an easy way to save money.
“This is a lot better for me,” she said.
Refinancing an auto loan isn’t always just because of the lower interest rates, Marks said. Extending the amortization of the loan allows customers to pay lower payments for a longer period of time, allowing a greater portion of their income to be directed toward high-interest debt such as credit cards.
Refinancing is not always going to work out for everyone, Marks said, but it’s always a good idea to check.
“If you don’t know, you’re always going to wonder,” he said.
Melissa Whittaker, the branch manager for the CSRA Consumer Credit Counseling Services, said she has found auto-loan refinancing to be helpful only for those with excellent credit.
“It can be difficult to do. You have to have really great credit, and the age and mileage on your car matters,” she said.
A few years of responsible financial choices can make all the difference in the world when it comes to credit scores, she said, so she still recommends her clients check rather than just assume it won’t help.
Ed Templeton, the president and CEO of SRP Federal Credit Union, said customers who have bought cars anytime longer than two years ago are probably paying significantly more than they could be.
“It’s about knowledge, like most things in life,” he said. “You don’t want to be guessing with your finances.”