Automakers have spent millions on refinancings, but the market has been in a slump for some time.
The industry is hoping that by refinancing loans to consumers and offering them loans at lower rates, it can attract new consumers to the market and spur consumer spending.
As consumers head to the polls in November to elect new members of Congress, the auto industry and some policymakers are pushing to make refinancing easier for consumers.
The National Association of Home Builders said in a statement on Wednesday that refinancing is the fastest-growing form of financing in the U.S. This month, the NABBC announced that refinancing will account for nearly one-fifth of the industry’s total loan volume.
“Today, the industry is making refinancing the new standard for consumer lending, offering refinancing at lower monthly payments and allowing borrowers to refinance in full for the first time,” the NAFIB said.
With new refinancing options such as the auto title loan and auto loan refinancing, consumers could have more flexibility to refortify at a lower rate, said Andrew McGlothlin, chief executive officer of Home Capital Advisors, a consumer finance firm in Columbus, Ohio.
“In general, the government-backed loans they are getting are more like a revolving line of credit,” he said.
“It’s kind of a good idea for the government to take on that risk.
The NAB is the one company that is really providing a bridge for people to refinancing.”
For borrowers who don’t qualify for a fixed-rate loan, the banks and mortgage lenders have made refinancing more attractive by offering lower rates.
“We think refinancing for low-income families is a good move,” said Jim McWilliams, director of consumer finance at Citi Financial in New York.
“A loan of $1,000 will be a great loan for them, and they’ll get that loan.”
However, McWilliams added, there are certain risks associated with refinancing.
“You have to take into account that you’re dealing with the financial institutions who are going to be the primary lenders,” he added.
Another potential risk is that borrowers may not qualify for auto loan refinances.
Some lenders, such as Wells Fargo, have stopped making auto loan modifications available to low- and moderate-income borrowers.
The National Automobile Dealers Association said it would like to see a new refinance tool, but also said refinancing can be challenging for borrowers who can’t refinance at all.
“If you’re just getting a new car, refinancing doesn’t seem like a big deal,” said Mark Williams, president of the National Dealers and Automobile Association, in an interview with ABC News.
But some borrowers, such a single mother in Virginia who is in the market for a new vehicle, are more than willing to take the risk.
“It’s not a big issue, but it’s not like I don’t want to do it,” she said.
The Associated Press contributed to this report.