18 Million Auto Loan Borrowers Eligible for Refinancing, Could Save $90 Monthly

TransUnion analysis reveals 18 million auto loan borrowers can save $90/month by refinancing. Refinanced loans outperform original purchase loans by 170 basis points in delinquency rates, and near-prime borrowers see a 320 basis point improvement. Lenders can target financially savvy consumers, providing relief amid economic pressures.

Persistent inflation and elevated interest rates have placed significant pressure on household budgets, prompting consumers to seek ways to improve their monthly cash flow. According to a new analysis from TransUnion (NYSE: TRU), auto loan refinancing presents a meaningful path to savings for millions of consumers, while also offering valuable opportunities for lenders.

The analysis reveals that out of nearly 80 million open auto loans in the U.S., approximately 18 million are considered "in-the-money" for refinancing. This term refers to borrowers whose current loan rates exceed the prevailing average APR, making them strong candidates to benefit financially from a refinance. While rising interest rates have reduced the average monthly savings from auto loan refinancing—from $1071 in 2021 to $90 in 2024—these savings remain meaningful for many consumers [1].

More than half of consumers surveyed indicated they would be motivated to refinance if they could save between $50 and $149 per month. Refinancing an auto loan can reduce monthly payments substantially and bring much-needed financial relief to millions of Americans. The number of consumers who are "in-the-money" for an auto loan refinance is poised to grow substantially if the Federal Reserve lowers interest rates. Currently, approximately 18 million consumers meet the criteria and can lower their APR. However, even a modest 25-basis point rate cut would increase that number to nearly 20 million, while a whole percentage point (100 basis points) reduction could expand the pool by an additional 6.5 million borrowers [1].

More than half of the 18 million consumers "in-the-money" for a refinance have an estimated APR of greater than 10% on their existing auto loan. This high-rate cohort represents low-hanging fruit for lenders, especially considering that refinanced loans consistently outperform original purchase loans across all credit tiers. An analysis of Q4 2023 vintage loans reveals that consumers who refinanced their auto loans were significantly less likely to be 60 or more days past due (DPD) at the 12-month mark—by a margin of 170 basis points. The performance gap was even more pronounced within the near prime segment, where refinance borrowers outperformed purchase loan borrowers by 320 basis points [1].

Lenders should consider targeting qualified borrowers for refinance opportunities, which have historically shown stronger repayment behavior. In addition to using traditional credit for prescreening purposes, lenders should employ tools to ensure that offers are made in accordance with their current underwriting strategies. For example, leveraging TransUnion TruVision LTV prescreens as part of the prescreen process would help find consumers who are in a specific equity position for a refinance offer [1].

In conclusion, TransUnion's analysis provides compelling evidence of an untapped refinancing opportunity in the auto loan market. With 18 million borrowers currently "in-the-money" for refinancing out of nearly 80 million total auto loans, this represents a substantial addressable market for lenders. While the average monthly savings has decreased from $107 in 2021 to $90 in 2024 due to rising interest rates, this amount remains significant for household budgets under pressure from persistent inflation. Lenders can target financially savvy consumers, providing relief amid economic pressures while also benefiting from the superior performance of refinanced loans.

References:
[1] https://newsroom.transunion.com/new-transunion-analysis-finds-18-million-auto-loan-borrowers-could-save-substantial-money-by-refinancing-their-loans/