The Latest Industry Overview from the Top Car Loan Refinance Company
ycharts.com – Inflation Rate
Mannheim Used Vehicle Value Index
Englewood CO, Aug. 16, 2024 – iLending, a national leader in automotive refinancing, is pleased to announce the next installment of our report on the State of the Car Loan Refinance Industry. These insights are based on our internal data coupled with industry and consumer information. The intent of the publication is to provide meaningful insight for those interested in the auto loan refinance market, as well as for consumers that may be considering refinancing their existing auto.
The first half of 2024 brought uncertainty, inflationary pressure and the uneasiness of a pending Presidential election cycle. Throughout these turbulent times, iLending has remained committed to its mission of providing exceptional service and support to its clients, partners and lender network.
Despite these obstacles, iLending has successfully helped thousands of clients with refinancing options for the past eight months and remains very confident they are prepared to help even more through the end of year and into 2025.
“iLending successfully weathered the storm that has been the past 18-24 months. Now we have high expectations that decreases in rates, controlled inflation and consumer pent up demand will drive our business onward and upward as we move from 2024 into 2025.” stated Nick Goraczkowski, President of iLending. “Our investments in the customer journey, solidifying relationships with long standing as well as new lenders coupled with fantastic lead generation partners are brewing up a perfect storm for clients to save more money and regain financial certainty.”
Interest Rates – Moving Target!
The Auto Refinance Industry is directly correlated to interest rates and the decisions of the Federal Reserve. While interest rates plateaued for nearly a year, all indications are strongly pointing to a reduction thus creating renewed opportunity for millions of Americans to take advantage to escape high interest auto loans.
Just a few days prior to our Insights Release, the Annual Inflation rate came in at 2.9%, the lowest since March of 2021. Most outlets and analysts predict this will seal a rate reduction in September, with the size of that cut still be up in the air.
The Federal Reserve has held rates steady since September of 2023, plateauing between 5.25% and 5.5%.
“2023 was a fight and we pushed hard. While we had optimism late last and early this year for rate cuts in Q2, they did not materialize. Instead of sitting back, we simply continued the fight, invested in our people and processes and kept our focus on helping everybody we possibly could.” said Goraczkowski, “Frankly, that’s just who we are.”
Regardless of the rate cuts not materializing in the first half of 2024, iLending is optimistic and preparing for major growth, supporting opportunities for families to save. For those that have held on for lower rates, iLending is and will be ready.
Inflation
Good news – Inflation continues on a downward trend, and indications appear to show the economy will forgo becoming recessionary. Due to this, the auto refinance industry, consumer sentiment and lender environment all are showing positive signals, further increasing the potential for interest cuts in the foreseeable future.
As of our last Industry Insights in February of this year, the Inflation rate was 3.35%, however as of July it has dropped to 2.89%.
Used Car Book Values
As we enter Q4 2024, the used car market is showing signs of stabilization after a significant decline over the past couple of years, following the unprecedented price surge of recent years. This stabilization not only brings renewed confidence for consumers considering car loan refinancing but also allows lenders to better balance loan-to-value (LTV) ratios on vehicles. With more consistent book values, lenders can approach refinancing with greater accuracy and security, creating a more favorable environment for individuals seeking to optimize their automotive financing and improve their financial standing. This positive shift in the used car market ultimately benefits both borrowers and lenders alike.
Lender Environment
As we enter Q4 2024, the Auto Loan Refinance Market is becoming increasingly optimistic, driven by anticipated Federal Reserve rate cuts expected as soon as September, but certainly by year-end and further reductions likely continuing into 2025. While lenders remain cautious due to recent higher losses linked to tighter family budgets and reduced disposable income, these lower rates are seen as a welcome relief.
The elevated interest rates of the past year placed significant strain on lenders, credit unions, and financial institutions, leading to tighter lending criteria and more conservative lending practices. Coupled with these challenges, the average family’s savings have dropped, making it even more difficult for many to access the benefits of auto refinancing.
Despite these headwinds, lenders and financial institutions have shown resilience, remaining committed to serving their customers. As we close out 2024, many lenders are approaching the market with renewed optimism, focused on expanding their auto refinance loan portfolios. Heidi McMillen, Director of Lender Relations at iLending, expresses this hopeful sentiment, “As delinquency rates increased, lenders tightened borrowing standards to ensure cost recovery. A potential rate reduction in September could provide relief to credit unions and lending institutions, alleviating some of the pressure on funding costs and supporting a more stable financial landscape for all.”
With lower rates on the horizon, families will have greater opportunities to reduce their payments and strengthen their finances, while lenders are positioned to help them save money and regain financial stability.
The Presidential Election Impact
The upcoming election has heightened economic uncertainty as candidates present their visions for the future. Anticipating the precise impact of the 2024 presidential election on interest rates is inherently complex, given the multitude of factors that influence such decisions. While elections can shape economic policies and market sentiment, the Federal Reserve’s interest rate determinations are grounded in a broad spectrum of economic indicators, including inflation, employment, and growth.
At iLending, we remain vigilant in monitoring economic indicators, central bank announcements, and market dynamics to anticipate potential shifts in interest rates in 2024 and 2025. While the presidential election may influence market sentiment, it is just one of many factors that contribute to interest rate decisions. We are committed to helping our customers navigate these changes and seize opportunities for financial improvement.
Summary
Based on the factors above, iLending believes the opportunity for consumers to qualify for and save money by refinancing their existing auto loans is: Above Average for mid- and sub-prime borrowers and Average for Prime borrowers due to interest rates still being high, with the caveat these improve as potential rate cuts take place in 2024 and early 2025.
Interest rates have leveled off, with strong signs that the Federal Reserve could lower rates as soon as this month. We expect this to boost optimism and create a realistic expectation that more people will seek and find opportunities to save money and increase cash flow in 2024 and into 2025. There continues to be options to extend loan terms to lower payments, and clients may be able to skip up to 90 days of payments.
With saving money as a key priority, especially given the continued pressure of increased housing, grocery and other expenses, iLending remains laser-focused on helping clients reduce their monthly car payments and enhance their overall financial stability.
