Three Reasons People Don’t Refinance Their Car Loan (and Why None of Them Should Stop You)

I've worked in and around cars at many points in my career. The thing that still gets me is how many people are paying more than they need to on their auto loan-not because they made bad decisions, but because no one showed them a better option existed.

We recently surveyed 2,000 car loan holders about refinancing.¹ Nearly 30% had struggled to make a car payment on time in the past year. And 85% said saving $150 a month on their car loan would make life "significantly easier." Yet, 70% have never checked to see if they qualify for a lower rate. That's a lot of people carrying more than they should be, without knowing they have options.

The survey identified three main hesitations among those who haven't refinanced: concern about credit score, too much hassle, and fees or penalties. Each hindrance is understandable. Here's why none of them should stop you.

"It will hurt my credit score."

Credit score anxiety is real. But checking your rate through Caribou starts with a soft pull, which has no impact on your score at all. Checking is risk-free, and you have nothing to lose by looking.

A hard inquiry only happens if you choose to move forward with an offer, and even then the impact to your FICO score is typically under five points, rebounding within a few months.²

The bigger point is that refinancing into a lower monthly payment reduces your debt-to-income (DTI) ratio, which improves your access to credit for the entire life of the loan. A lower DTI is key to getting better rates for other loans like mortgages.

Checking your options doesn't hurt your score. The path that protects your credit most is the one that keeps you current on your payments.

"It's going to be a hassle."

This one is grounded in experience. Our survey found that 44% of borrowers felt pressured during the original financing process, and 1 in 4 don't believe they got the best deal. If that was your introduction to auto lending, your instinct to avoid repeating it is understandable.

But refinancing isn't the same as buying. There's no dealership, no sales floor, no trade-in negotiation. You already own the car. You're just swapping your current loan for one with better terms.

Caribou's refinancing process takes customers minutes to check their rate. Moving forward involves submitting basic documentation such as your driver's license, car insurance, and registration-information you likely already have in your glovebox. Caribou handles the titling paperwork so you can avoid standing in line at the DMV.

There are steps involved, but the effort is a fraction of what most borrowers imagine.

Our survey found the median savings threshold borrowers consider refinancing "worth the effort" is $100 a month. Most who qualify would clear that easily. The problem is most never check.

"The fees will wipe out whatever I save."

This is a valid question as mortgage refinancing often carries real closing costs, sometimes thousands of dollars, and it's therefore reasonable to assume auto refinancing works the same way.

But auto refinancing is different. There are no application fees, upfront costs, or other out-of-pocket fees to refinance your auto loan though Caribou. In the case that a lender charges a fee, it's already factored into your rate and savings calculation, so that lower monthly payment you see is what you'll pay.

Additionally, simple interest auto loans-which make up the majority of auto loans in the U.S.-rarely carry prepayment penalties. Federal law also prohibits lenders from charging prepayment fees for auto loans beyond 60 months.

The fear of fees is usually bigger than the fees themselves. The right question isn't "are there any costs?" It's "do the savings outweigh the costs?" For most borrowers, the answer is yes.

What's actually at stake

Borrowers who save $150 a month say they'd use it to pay down debt, build emergency savings, and cover everyday expenses. For most borrowers, that money means breathing room, not financial optimization.

Americans collectively carry more than $1.67 trillion in auto loan debt,³ and a significant share of those borrowers are paying more than they need to. But 70% of borrowers still haven't checked whether they qualify for a lower rate, meaning most people who could benefit haven't even asked the question.

If you're carrying an auto loan and you've never checked your rate, I'd encourage you to look. You can find out in a few minutes with no credit impact. That's a low cost for information that could be worth $162 a month-what Caribou customers save on average from refinancing.⁴

The hesitation is understandable. But the deterrents are smaller than they appear. And the cost of not looking is a payment that's higher than it needs to be, every single month.