NEW YORK (MainStreet) — Earlier this month, Ryan Endean, a 34-year-old communications director at a Sacramento management firm, refinanced his auto loan in a move that he estimates will save him some $2,000 over the duration of the 72-month loan. Suddenly, a year into his loan, he's driving his certified pre-owned 2012 Nissan Altima a little more spiritedly on account of the savings.
But Endean's nimble maneuver – switching from his dealership's 6.99% interest rate to the more palatable 2.3% through Patelco Credit Union – is a lesser-practiced personal finance tactic. For consumers, the refi strategy usually calls to mind home mortgages, an especially popular move given the low interest rate environment in the wake of the Fed's quantitative easing plan. But auto loan refi gets forgotten: more than a quarter of Americans don't know this is an option, according to a survey from RateWatch, a premier banking data and analytics service owned by TheStreet. To boot, only 14.8% of respondents had refinanced their car loans – much to the detriment of Americans' wallets. And even though those ages 30 to 44, like Endean, were most likely to be aware of auto refinancing options, only 20% had taken advantage of them.
Standard auto loan refinance logic holds that a shorter-term loan will require higher monthly payments while incurring a lower interest rate. But with the way the economy has been, not as many people have as much cash to part with each month. As such, they'll take on longer loans.
"In today's market with the proliferation of long term loans, there are more lenders offering refinance by being able to extend the loan term in order to offer a lower monthly payment," said Melinda Zabritski, Experian's senior director of automotive finance.
In light of these long loans, consumers are looking for ways to keep interest rates lower.