Affordability Is Driving Consumers to Auto Loan Refis — and Opening a Growth Route for Lenders
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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The price of new cars has grown prohibitive for many consumers. As levels have risen, the financed portion of those purchases has reached record levels. For example, in the first quarter, the average amount of new car financing rose by 6.6% to $45,028, a significant jump in the growth rate of prices over even the increase from Q1 2024 to Q1 2025, which was only an average of 2.5%, according to analysis by S&P Global Mobility and TransUnion.
The trend is only marginally better for used vehicle financing, which rose 5% to an average amount financed of $27,232 in the first quarter versus the first quarter of 2025.
The companies also reported that in the first quarter the average monthly payment for a new car rose 4.3% to $786 and the average payment for a used car rose 2.9% to $536. This is in spite of lower interest rates and extended terms.
In a similar study, Edmunds found that new car buyers agreeing to monthly payments of $1,000 or more now represent 20% of everyone financing new car purchases — up 17.7% from the first quarter of 2025.
Attempting to manage rising loan amounts and increasing monthly payments, consumers are trying multiple gambits.
Longer terms are becoming more common, for example, with a record 22.9% of new car purchases being made with loans of 84 months or longer, according to Edmunds. Given other needs, many consumers are also reducing their down payments, which in turn drives higher borrowings and lengthening terms, the firm said in an April report.
What’s changed: Consumers are beginning to say, “Enough!” They’re deciding to hold onto the cars they have, seeking auto loan refinancing to improve affordability or restructure their auto debt.
As shown in the nearby chart from TransUnion, the share of auto loan originations that consist of auto loan refinancings increased in the first quarter to 5.2%. That’s the highest level since the first quarter of 2022, and signs are this trend will grow as Americans seek ways to cope with inflation and a pessimistic job picture.
Need to Know:
- Auto loan originations remain about 10% below pre-pandemic levels, with the fourth quarter of 2019 as a baseline, according to TransUnion. Fourth quarter 2025 originations ticked down in the wake of earlier demand that was goosed by the expiring federal electric vehicle tax credit.
- Offering auto loan refinancing is a way to increase an individual lender’s volume in this area, in spite of falling overall originations, making direct loans that often replace indirect loans made through dealers.
- Refis can save consumers significant money. A fall 2025 study by LendingTree found that refinancing could save people an average of $142 monthly.
- Demand for auto refinance loans is meeting a growing level of competition. Beyond traditional lenders, especially credit unions, there are specialized auto refinance marketplace platforms like Caribou, Autopay and Gravity Lending, as well as personal loan companies that have expanded beyond their traditional businesses to add auto refis.
How Ardent Credit Union Tackles Auto Refi Opportunities
Philadelphia-based Ardent Credit Union has been making strategic shifts in its auto lending. As recently as 2024, the credit union’s auto loan production was 70% purchase and 30% refi. Now the mix is about 50%-50%, according to Ryan Keene, first vice president of lending.
Ardent’s emphasis on auto refi lending began in early 2025, synching with the decision to phase out indirect lending through dealers to concentrate on direct lending. The withdrawal wrapped up in March.
Keene says the changing economics of the dealer lending approach convinced Ardent, with $931 million in assets, to get out of the business, at least for now.
“It didn’t make sense for us, with rates where they are,” says Keene. Putting more into direct auto refi was an opportunity to help members with a current problem, he says, as well as a way to pick up some of the volume that went away as new indirect lending was discontinued.
Changing consumer appetites. “We’re seeing less demand from our members for loans for buying cars, as affordability becomes a real challenge,” says Keene. “Refinancing makes sense in a higher-cost environment.”
The cost of increasing fuel prices in the wake of the Iran war, rising insurance costs, and higher maintenance costs add more impetus for consumers to seek better credit terms.
The marketing twist: The slogan behind the credit union’s shift is “Keep your car. Get a better loan,” according to Alletta Emeno, senior vice president and chief marketing officer.
Read more: Why the ‘K-Curve’ Demands Proactive Strategies from Banks Right Now
It’s Not Just About the Fed’s Impact on Interest Rates
Economic uncertainty and the tug of war over interest rate policy epitomized by the debate surrounding the change at the top of the Federal Reserve makes the shift towards refis seem chancy. But Keene explains that there are opportunities even if rates climb.
Key insight: “We’ve seen that even prime and super prime borrowers are overpaying for credit at dealerships,” says Keene. He says people with strong credit scores would seem to merit the lowest rates, but in his experience that hasn’t been the case for years.
“People in those credit tiers are getting marked up at the dealerships,” says Keene. “We’ve been able to save them two or three percentage points, sometimes more, off the auto loan they got at the dealership.” (Dealer loans are made by a combination of automakers’ captive finance companies, bank and credit union indirect programs, and independent finance companies.)
In fact, sometimes the life-span of those dealer-originated loans isn’t long. Emeno points out that a loan need not be seasoned to be eligible for a refi. Some refi candidates come to Ardent after working with the credit union’s auto loan concierges but being persuaded to take another lender’s loan at the dealership. They’ll come back to the concierge team and tell them about the dealer loan. Often Ardent can craft a better one.
“If you bought a car yesterday, and you see that you could refinance, we can do that for you right away,” says Emeno.
Another insight: Consumers’ financial circumstances can change over the life of the original loan.
“Someone’s credit may have improved, which means that they may now qualify for a lower rate,” says Emeno. Ardent’s banking app includes a feature allowing members to constantly monitor their credit rating, which can clue them into opportunities to explore refinancing at a better rate, she says.
Emeno recalls a member whose circumstances had changed so drastically that their original 25% loan was refinanced at about half that rate.
For others, the opportunity to shorten the term — they may be making more money and can afford a higher monthly payment — will retire the debt that much faster and save them significant interest charges. On the other hand, people seeking some debt relief can lengthen the term on their original debt through refinancing, gaining a smaller monthly payment. (At least one auto refi market platform actually suggests using the loans as a way to pick up money for other purposes — a car-based variation on home equity credit.)
“We’re pretty confident that demand is going to continue as long as prices stay high,” says Keene.
Ardent’s refi loans will go out as far as 84 months, the duration hinging on the make, model and age of the vehicle.
Read more: Credit Union Concierges Remove the Confusion and Fear of Auto Buying
Getting the Word Out that Auto Refi is Doable
One of the hurdles to be overcome is that many people don’t know that auto refinancing even exists, according to Emeno. Mortgage refinancing became a serial affair when rates kept dropping, as people took the opportunity to cut their rates, extend terms, change their loan type or extract cash. Many lenders and mortgage banks routinely promote mortgage refis, but that hasn’t been as usual with auto refi, at least in the past.
Emeno says the credit union has used several strategies to find prospects. One is through Ardent’s credit score checking service itself, which provides a channel for targeted offers. Another is marketing in places where and when people are thinking of cars — gas stations and auto parts stores, for example. Digital and other media advertising is used to reach out more widely.
“Some of this is awareness,” says Emeno. “They might not have an auto loan, but they might need one in the future.” This puts Ardent’s name out there both for purchase loans and refis. Marketing promotes the fact that there are no application or origination fees and that same-day approvals are typical.
Cash rewards move the needle. Promotional incentives have been a key part of Ardent’s auto refi marketing. Currently, for example, the credit union is offering applicants a $300 incentive, along with the option to delay their first payment for two months. (Interest accrues during the delay. To qualify for the bonus, the loan being refinanced must be at least $10,000.)
Emeno says the $300 incentive is designed to overcome inertia.
Read more: How to Get Your Share as Auto Loans Throttle Down in 2026
An Entrée to New Members and Markets
Ardent has been on a push to expand its membership. In late 2025 it announced adoption of a multiple common bond charter, which opened member eligibility up nationally, potentially, and far beyond the credit union’s original five-county market. Ardent initially is working on expansion in adjacent geographies. In April Ardent’s new member rolls had grown by about 17% year over year.
The auto refinance strategy has been part of the effort to reach out to new markets, Emeno says.
Emeno says a bit more than half of the refi applications are coming from nonmembers. Application volume overall is up over 2025 by more than 50% and approval rates run around 65%-705. Keene points out that purchase loan approvals run in the range of 35%-40%.
“It’s a good way for us to introduce people to Ardent, because it shows the credit union mission of trying to help people improve their financial situation,” says Emeno. “And you don’t have to be near a branch to take advantage of it.” Refinancing cars readily adapts to an all-digital approach.
Adds Emeno: “People are not necessarily looking for more debt — but cheaper debt sounds good.”
Read more: Success in Home Equity Hinges on Quality (and Fast) Customer Experience
