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Our Perspective

MAY 05, 2022

What do rising interest rates mean for your car loan?

With inflation at its highest level in decades, the Federal Reserve is raising interest rates and we’re already seeing the impacts.



3 min read

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With inflation at its highest level in decades, the Federal Reserve is raising interest rates and we’re already seeing the impacts. The average 30-year fixed-rate home loan has jumped above 5% according to Freddie Mac–the highest it has been since 2010. 

We asked our Chief Lending Officer, Jason Tepperman, to answer some of our questions about how rising interest rates might impact auto refinancing. Here’s what he had to share:

Is it still worth refinancing my car loan, even though interest rates are going up? 

Yes. The savings that consumers can realize by refinancing their car loan are mostly unrelated to the interest rates set by the Federal Reserve. Today, Caribou’s customers save an average of 6 percentage points on the interest rate of their car loan when they refinance. By contrast, the Federal Reserve is expected to increase interest rates broadly by about 3 points this year. There’s still plenty of opportunity to save!

Will rising interest rates impact mortgage and auto refinancing the same way?

The short answer is no. The savings from refinancing your mortgage and your auto loan are generated in very different ways. With mortgage refinancing, most of the savings come as a result of small reductions in interest rates that are set by the Federal Reserve. Because home mortgages are much larger than car loans, even half-point or one-point savings can help. But, when the Federal Reserve raises interest rates–as is now happening–mortgage refinancing soon becomes unattractive.

Unlike mortgages, the savings we generate through auto refinancing don’t rely much on the Federal Reserve’s decisions about interest rates. The savings from auto refinancing come from finding you a lender that will offer a fundamentally better loan than the one you have today. We accomplish this by taking a fresh look at your credit history, bringing deep expertise in auto lending and avoiding the car dealer’s markup.

So, if you were thinking about refinancing your mortgage to save money, you may find it’s even more advantageous to refinance your auto loan.  

How might inflation impact whether it is worth refinancing my car loan?

With gas prices and car-related expenses rising, refinancing your auto loan is a straightforward way to lower your monthly payments. For example, we’re saving people an average of over $100 a month* when they refinance with Caribou.

We’re on a mission to help people take control of their car payments. If you’re interested in refinancing your car loan, we can help you access competitive rates in minutes.

Learn more here

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Contact Details
NMLS #1746612

Mon - Fri: 9am - 8pm EST

Sat - Sun: 9am - 4pm EST

1717 Rhode Island Ave, NW, Suite 500 Washington, DC 20036

* Refinance savings may result from a lower interest rate, longer term, or both. There is no guarantee of savings. Your actual savings, if any, may vary based on interest rates, the repayment term, the amount financed, and other factors.

+ To check the refinance rates and terms you qualify for, we conduct a soft credit pull that will not affect your credit score. However, if you choose a loan product and continue your application, we or one of our lending partners will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

++ Social security number is required should you choose to move forward in the loan application process.

** APR is the Annual Percentage Rate. Your actual APR may be different. Your APR is based on multiple factors including your credit profile and the loan to value of the vehicle. APR ranges from 5.99% to 28.55% and is determined at the time of application. Lowest APR is available for a 36 month term, to borrowers with excellent credit. Conditions apply. Advertised rates and fees are valid as of 11/16/23 and are subject to change without notice.

Terms and Conditions apply. Caribou reserves the right to modify or discontinue products and benefits at any time without notice. Participating lenders, rates and terms are also subject to change at any time without notice. The information you provide to us is an inquiry to determine whether our lenders can make you a loan offer. If any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. We do not guarantee that you will receive any loan offers or that your loan application will be approved. If approved, your actual rate will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors.