Driving Down Rates; Low Interest Rates Spur Online Auto Refinancing
Byline: Chris Baker, THE WASHINGTON TIMES
Robert A. Walls knew interest rates were falling fast, but it never occurred to him that he could take advantage of the record lows by refinancing his car loan.
Then a few weeks ago, Mr. Walls, a McLean behavioral therapist, discovered PeopleFirst Inc., the nation's largest Internet automobile lender. The San Diego company refinanced Mr. Walls' 2000 Corvette and 2001 Cadillac STS, shaving roughly $2,000 off his loans.
"It was a pretty simple process, and it's not an insignificant amount of money," Mr. Walls said.
Record-low interest rates have encouraged millions of Americans to refinance their mortgages. But few consumers seem to realize they can refinance their car loans, too.
An estimated 525,000 automobile loans with a total balance of $10 billion will be refinanced in 2003, up from 297,000 loans with a balance of $4.5 billion in 2001, according to forecasting company CNW Marketing Research.
"That's really a drop in the bucket. I don't think consumers understand what a great opportunity it is," said Joseph J. Kennedy, president and chief operating officer of E-Loan Inc., another major online lender.
Financial advisers say the benefits of refinancing a car loan can be substantial. In most cases, the process is easy, costs are minimal and the savings kick in immediately.
"I love it. We recommend it to everybody," said Steve Rhode, president and co-founder of MyVesta.org Inc., a Rockville credit-counseling service.
"It is something that can help if you need a little bit of breathing room financially. If you're in a real jam, it's not going to help that much," Mr. Rhode said.
If a car owner financed a five-year loan one year ago for $25,000 at a rate of 7 percent, he would save $457 during the remaining four years by refinancing the loan at 6 percent, according to PeopleFirst estimates.
If the original interest rate was 8 percent, refinancing the remaining balance for four years at 6 percent would save $925 during the life of the loan, according to the company.
Car owners should consider refinancing only if they can significantly reduce their interest rate and avoid stretching the term of the loan beyond their original repayment schedule, said Greg McBride, senior analyst for personal-finance Web site Bankrate. …