When customers refinance, dealers lose F&I income and underwriting profits from the cancellation of GAP and other products and, in many cases, the opportunity to secure financing for the customer’s next purchase. With interest rates on the decline, nearly two-thirds of Americans who secured an auto loan in the past 24 months are “likely” to refinance soon, according to the results of a new survey by TransUnion.

Among other highlights, the survey found that:

• 63% of recent car buyers are “likely” or “very likely” to refinance to reduce their monthly payment.
• 65% “agree” or “strongly agree” their current payment is a strain on their personal finances.
• 74% have an interest rate of 4% or higher. (Another 10% did not know their rate.)
• 81% are aware they can refinance their loan.

Analysts noted a combination of high prices and borrowing costs led to “significantly” higher monthly payments for a large group of borrowers.

“Consumers who locked in low mortgage or auto loan rates in 2020 and early 2021 benefited, while those entering the market later faced much steeper costs,” the report states, in part. “Despite this, life continued, and those needing to purchase homes or cars still had to finance these purchases if they didn’t pay in cash.”

Read more at TransUnion