Auto Loan Refinancing Demand Is On The Rise

July 9, 2025 1:13 pm

Refinancing is a pretty common thing in the world of mortgages, and for good reason – if one can secure a better interest rate due to a drop in rates or an improvement in credit, it can save one quite a lot of money over the long haul. Additionally, with mortgages, customers sometimes look to refinance as a way to lower payments by extending terms, or cash out on the equity they’re built up in the home. However, auto loan refinancing hasn’t traditionally been quite as popular, though all of a sudden, that’s starting to change.

According to a new report from Automotive News, a pair of auto loan lenders are seeing a rather dramatic rise in refinancing as it pertains to those types of borrowing, in fact. Michael Williams, senior vice president of consumer lending at American First Credit Union, said that he’s witnessed a “seismic shift” in demand for auto loan refinancing over the past 18 months – with figures rising from the typical 35 percent of existing deals all the way up to around 50 percent. In the last two months, that number has grown to 55 percent, too.

This all happened even as the number of applications remained unchanged, merely offsetting consumer demand for new auto loans rather than generating new business. The same is true of PenFed Credit Union, which said that its auto loan refinancing rates have grown from 15 percent of its total applications to 20-25 percent over the past few months. Much of this growth in demand stems from a desire to lower monthly payments, coming from customers who have improved their credit scores or have positive equity in their vehicle.

On average, customers that refinance their auto loan are saving somewhere between $126.25 and $147.26 per month – at least, those that have good credit scores and steady incomes. While many aren’t even aware that they can refinance an auto loan, this growth makes sense given the stratospheric rise in average monthly payments over the past few years – in fact, the percentage of monthly payments exceeding the $1,000 mark just set another all-time record in Q2 2025.

By Brett Foote

Brett's lost track of all the Fords he's owned over the years and how much he's spent modifying them, but his current money pits include an S550 Mustang and 13th gen F-150.