As Auto Shopping Season Heats Up, it’s Clear that Some Consumers Refinance Their Loans within Days of Purchase
August 09 2018 - 8:00AM
Late summer usually means big business for auto dealerships. In
fact, TransUnion (NYSE: TRU) found that auto loan originations
between 2015 and 2017 spiked 5.5% in the third quarter compared to
the yearly quarterly average. A new analysis by the TransUnion auto
business found that many consumers actually refinance their initial
auto loans just a few days after securing them, often resulting in
a lower monthly payment.
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“The end of summer is generally a key time for the auto
industry, as better weather means more consumers are shopping for
vehicles. It’s also a time of year when some consumers can find a
deal before automakers roll out new models in the fall. This year,
the prospect of rising automotive tariffs has also made it a hot
time to buy,” said Brian Landau, senior vice president and
automotive business leader at TransUnion. “TransUnion found that a
number of consumers are taking advantage of the opportunity to
refinance their new purchases, despite the rising interest rate
environment. Consumers who might be paying a somewhat higher
interest rate on the loans they obtained through the dealership may
find that refinancing can lower those interest rates or extend the
loan term – in other words, help those same consumers manage their
monthly cash flows.”
Late Summer = Jump in Auto
Originations
Year |
Avg. Quarterly Originations |
Q3 Originations (July-August-September) |
Percent Difference |
2017 |
6,877,618 |
7,111,248 |
+3.4% |
2016 |
7,081,165 |
7,468,033 |
+5.5% |
2015 |
6,988,098 |
7,527,881 |
+7.7% |
(2015-2017 Average) |
6,982,294 |
7,369,054 |
+5.5% |
According to the recent TransUnion study of 1.5 million
refinanced auto loans originated in 2013 and 2014, there is a spike
in refinance activity within a few days of purchase. “We found that
some consumers, especially those interested in taking advantage of
loyalty programs and bundled options, will refinance their loans a
day or two after the original purchase,” added Landau.
The study indicated that the cash flow benefits from refinancing
can be compelling. The average decrease in auto loan debt
service–for those specifically seeking a payment reduction–was $52
per month. The average refinancing consumer achieved an APR
reduction of 2.4%.
“In an increasingly competitive auto finance market, there is a
lot of potential for auto lenders to tap into refinancing as a way
to grow their business. But market education is key. Nearly
two-thirds of auto finance companies offer refinancing, but
according to a recent Harris poll, less than half of consumers are
aware they may use this option as part of their overall financing
strategy. Broader recognition of this option can benefit both
consumers and lenders seeking new business,” concluded Landau.
About TransUnion (NYSE:TRU)
TransUnion is a leading global risk and information solutions
provider to businesses and consumers. The company provides consumer
reports, risk scores, analytical services and decisioning
capabilities to businesses. Businesses embed its solutions into
their process workflows to acquire new customers, assess consumer
ability to pay for services, identify cross-selling opportunities,
measure and manage debt portfolio risk, collect debt, verify
consumer identities and investigate potential fraud. Consumers use
its solutions to view their credit profiles and access analytical
tools that help them understand and manage their personal
information and take precautions against identity
theft. www.transunion.com
We call this Information for GoodSM.
http://www.transunion.com/business
Contact
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Dave Blumberg |
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TransUnion |
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E-mail
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David.Blumberg@transunion.com |
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Telephone |
312-972-6646 |
Harris Poll. (2017, December 24). Refi isn’t
just for mortgages; it can work on auto loans, too.
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