Homebuyers have been taught that when interest rates go down, it's time to consider refinancing the mortgage. Is the same true of your auto loan?
In this video recorded on Feb. 4, Kevin Bennett, CEO of consumer finance start-up MotoRefi, joins Brendan Mathews from Motley Fool Ventures to talk about the best times to refinance your auto loan. Auto lending and mortgage lending are two very different industries, and what's true for one isn't always true for the other.
Brendan Mathews: Kevin, how does changing interest rates affect your business and potentially falling interest rates?
Kevin Bennett: It's a great question. Because mortgage, and I'll go back to the mortgage space, is an efficient market, what that means is that for mortgage refinancing, and you see the headlines in the papers, it tends to be feast or famine. A falling rate environment, everyone refinances their mortgage. In a rising rate environment, no one refinances their mortgage. Auto refinance is a bit more stable, because most people are overpaying 2 to 3% APR on their auto loans. That's the case when rates are low, it's case when rates are high, but generally it's just an inefficient market. I will say you can always save money. You can probably save a little bit more in a falling rate environment, so it is also a good time to refinance your car. We have seen awareness of auto refinance increase a good bit over the last year. Through COVID, through falling rates, through awareness of mortgage refinancing. We've seen that when we look at Google searches, up about 40% year-over-year, normally up 5 to 10%. We've seen a good little bump from that from consumers who are looking to save money, consumers who are aware of refinancing in general because of mortgage and the headlines that that's created. I'd say consumers getting fancy and looking for ways to save money during COVID and uncertainty. We're certainly happy to have the privilege to help people save money and improve their financial security.