Auto dealers have a fresh opportunity to boost customer retention, generate new leads and strengthen lender relationships – by proactively promoting auto loan refinancing.
New research from TransUnion finds that nearly 18 million U.S. consumers are “in-the-money” for refinancing, meaning they’re currently paying above-average interest rates and could benefit from lower monthly payments through refinancing. Dealers who help identify and engage these customers – especially those who previously financed through their store – can re-establish contact, build loyalty and create new F&I income streams.
The revenue streams may include bonuses or incentives from lenders and offer dealers a chance to explain supplemental products and services about which the customer is unaware. And, of course, the interaction offers dealers a chance to ask customers about trade-in offers, boosting dealers’ used-car inventories and perhaps resulting in a subsequent sale to a likely financially stable customer.
“Many auto loan borrowers may not realize that refinancing is an option,” Satyan Merchant, senior vice president and auto and mortgage business leader at TransUnion, says in a news release. “As a result, those who do refinance tend to be more financially savvy and proactive about managing their credit. At a time when other segments of the auto loan market are facing performance challenges, lenders should consider targeting qualified borrowers for refinance opportunities, which have historically shown stronger repayment behavior.”
Dealers can partner with lenders to prescreen existing customers using tools such as TransUnion TruVision LTV, which helps identify those in a favorable equity position to refinance. Other services include Experian Auto Credit Prescreen, Equifax Prescreen and risk-based marketing and dealer management system (DMS) integration software from vendors including CDK Global, Reynolds & Reynolds and Dealertrack.
“Refinancing an auto loan can reduce monthly payments substantially and bring much-needed financial relief to millions of Americans,” says Jason Laky, executive vice president and head of financial services at TransUnion.
The incentive for consumers is real: While the average monthly savings from refinancing dipped from $107 in 2021 to $90 in 2024 due to rising interest rates, TransUnion found that more than half of consumers would be motivated to refinance if they could save $50–$149 a month.
Dealers can also use refinancing as a strategic marketing and retention tool.
Refinancing offers can rekindle engagement with past customers, especially those who might be nearing the end of their loan term or whose APRs have climbed. Currently, more than half of the refinance-eligible population is paying over 10% interest, meaning a significant segment of customers is ready to benefit.
TransUnion’s U.S. Consumer Credit Database shows the APR breakdown among the 18 million refi-ready borrowers:
- 17% are paying 10.0%–13.99%
- 20% are paying 14.0%–19.99%
- 15% are paying 20.0% or higher
This consumer pool could expand rapidly depending on interest rates, reports TransUnion. A Federal Reserve interest rate cut of just 25 basis points would increase the refinance-eligible population to nearly 20 million. A full percentage point reduction would add another 6.5 million borrowers to that list.
Refinanced loans also outperform original purchase loans across credit tiers.
TransUnion’s analysis of Q4 2023 loans shows that refinance borrowers were 170 basis points less likely to be 60+ days past due after a year. That performance gap jumps to 320 basis points in the near-prime segment.
In a high-rate, high-inflation environment, refinancing not only gives consumers a break; it gives dealers a valuable reason to reach out and re-engage. With the right tools and lender partnerships, dealers can turn this financial pain point into a win for both the customer and the bottom line.
