AUG 08, 2022
Using a lending marketplace to refinance offers many benefits.
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Have you heard of lending marketplaces when it comes to refinancing your car? A lot of people think that they don't need to refinance their car through a lending marketplace because they can get a better rate through a traditional lending institution. But, using a lending marketplace offers many benefits when it comes to refinancing your car.
Fast and flexible online marketplaces are growing in popularity. These marketplaces use indirect lending to extend additional financial resources like refinancing to car owners. The result is direct access to lending organizations through the marketplace network which helps you find better refinancing deals with lower interest rates. Let’s learn about how vehicle owners, lending marketplaces, and lenders can join in partnership resulting in beneficial refinance offerings.
Millions of drivers choose to finance their cars every year. While some people may go to a local lender like their bank down the street, others will choose indirect lending options through auto dealerships. Indirect financing is mainly associated with auto dealerships, and you are most likely taking out an indirect auto loan when you finance a car through the dealer. This is because the loan is actually coming from one of their lending partners.
But what about refinancing? As customers continue to look for one-stop-shop ways to source their auto refinancing after the buying process, it’s clear that indirect lending has a future beyond traditional auto dealerships. Enter lending marketplaces — an easy way car owners can take care of auto refinancing and car insurance at the same time.
Marketplaces pre qualify you as a borrower for suitable offers by offering you fast and affordable refinancing options from many different lenders. This helps both you as a customer and the lenders as service providers. As a customer, this means you can access more lending offers for your vehicle loan through the marketplace. For the lenders, they can offer more competitive options by accessing a whole range of new customers to serve like yourself.
The result is a tech-forward marketplace solution which places the power to choose a refinancing option in your hands as the vehicle owner. All you need to do is select the refinancing option you would like to have. Let's look at the pros and cons of direct and indirect lending.
To really assess how good marketplaces are, we can take a look at the pros and cons when it comes to direct and indirect lending options. The impact is two fold. First, consumers are impacted since they are receiving the end result of the financing when purchasing a vehicle. Second, lenders are affected as well since they are trying to provide high quality support and service.
For many, direct lending has been the best way to go about financing customer purchases for some time. Around 85% of all US car purchases are processed through financing, with plenty of drivers happy to find the right lender themselves. At face value, this can be good for car buyers and profitable for lenders. But does that make it the best option for you as a consumer? Your time is important, and time to funding is a concern for you as a buyer since you may want to lock in your rate. On the lender side, while direct lending is profitable, the lenders will still need to dedicate time and resources originating the loans.
Direct lending is certainly a popular option, but often, you can arrange indirect financing through dealerships. There is no shortage of dealerships that will work closely with a lending network to help get your car deal over the line. It’s also great for lenders and because you, as the customer, get to drive away having already secured the finances you need – making it a sensible choice. In fact, NADA reported that as many as 83.7% of new car buyers used dealer-assisted finances to buy cars in 2018.
Ok, great, so that shows that the majority of new car buyers in 2018 did indeed use indirect lending when financing their purchases, but so what? Well, the markets are changing. The traditional brick and mortar auto dealership isn’t what it used to be. For example, platforms like Carvana are becoming more popular to buy vehicles remotely as customer buying habits adapt to the market. The car buying and financing world is changing and refinancing after purchasing a car is also adapting.
Online refinancing marketplaces can pre-qualify you as a borrower and connect you to lenders who are looking for high-value customers. This gets you in front of loan offers faster, minimizes offer research, and limits time-intensive application paperwork. The lending marketplace provides a tech-forward solution, allowing you to move through the quick and compliant process. The result is a faster, more affordable, and convenient process to refinance your car loan.
Did you know the Caribou marketplace is one of the fastest growing platforms when it comes to refinancing your car online?
Think of a lending marketplace like shopping at your favorite store. You go shopping with an end goal in mind like saving money on your car payment or lowering your interest rate. You simply input your information into the marketplace portal and you can see a selection of available loan options. Then, you just need to choose the option you like the best and complete a few more steps to fund the loan. All without a lot of the painstaking efforts experienced in traditional lending processes and slow paper pushing.
The marketplace can collate all your vehicle information by something as simple as inputting your license plate number. In addition to that, you can pre-qualify with a soft credit pull, so you only see the most competitive offers available. In just a few easy steps, a whole amount of time and effort is saved compared to the traditional lending process.
The lender you choose also will be able to quickly move your application through the originating process – as a huge part of it is done automatically. This automation leads to all of the lenders across the marketplace lender network efficiently accessing, processing, and funding loans for thousands of qualified new customers in less time.
You can also easily add other products to your refinanced car loan through the marketplace. This makes it easy to find things like extended vehicle protection coverage, key replacement programs, or cosmetic care packages if you are in the market for them. Marketplaces can also offer other products outside of loans like car insurance as well.
Seamless online services offer a faster, more convenient service for you as a consumer. Like we saw during the 2020 pandemic, ease of access and online solutions can help you make informed choices and change shopping habits for the better. For 2022, iVendi assesses 45% or almost half of all car finance applications for the year will be made online, and as younger age groups take to the roads, this trend is likely to continue.
Auto finance is heading digital but despite this, automotive companies are lagging behind. Studies like PWC’s status assessment shows only 83% of dealerships have a dedicated online strategy capable of making the most of this change in the online world. Lending marketplaces offering online solutions are poised to take advantage of the growing number of consumers looking to finance and refinance their vehicles online – helping you make the most of indirect lending marketplace partnerships.
Digital marketplaces, such as Caribou, are a one-stop-shop for customers. They can find cheaper deals quickly, pick out a refinancing option, and apply it to their car loan.
Online lending marketplaces are a growing part of finding leading deals in the world of auto finance. But finding the right marketplace to use means that both customers and lenders need to assess each marketplace on its strengths and weaknesses. When looking for a potential marketplaces, it is important to pay close attention to:
Lending Team: The marketplace should have a knowledgeable team who can answer your finance-related questions through live chat, phone calls, and email.
Network & Partners: The lending marketplace should be a flexible extension of lender networks and organizations. They should have the right application, staff, tools to securely process loans.
User Experience: The marketplace should have a seamless omnichannel user experience. This includes human-centric sales with a consistent persona that helps customers through the sales funnel smoothly while providing real value.
Processes: The online marketplaces should be optimized around time saving efficiencies to save both customers and organizations valuable time. Look for a marketplace which has the best processes in place to process applications quickly.
Integrations: Look for marketplaces with the tech-forward integrations, such as automatic soft credit checks and automatic vehicle information retrieval. The efficiency, flexibility, and adaptability provide additional value to you as the marketplace user.
Data and insights: Consistent data analysis helps marketplaces constantly improve their own processes. Find a marketplace that knows how to use data and insights to its advantage.
Ongoing support and optimization: Marketplaces are all about you — the customer. The marketplaces that offer constant support to customers even after they’ve picked out their finance option will keep customers happy and become the go-to source for future needs.
Caribou’s smart, efficient, and flexible lending marketplace helps drivers find the perfect deals for them. With many options to refinance cars digitally, Caribou helps customers find the loans they need by finding a lender faster. Interested? Start your application today.
What is a lending marketplace? A lending marketplace uses indirect lending to extend additional financial resources like refinancing to car owners. The marketplace network can help you find better refinancing deals with lower interest rates.
What is direct lending? Direct lending, when it comes to car loans, means you are working directly with a bank or credit union.
What is indirect lending? With indirect lending, you take out a car loan from a third party like a car dealership who works with a bank or credit union in their network lender.
How can I find the lowest interest rate? Working with a lending marketplace can help you see the lowest interest rates from qualifying partners all at once.
* This information is estimated based on consumers whose auto refinance loan funded through Caribou between 11/1/2022 and 9/1/2023, and had an existing auto loan on their credit report. These borrowers saved an average of $115.58 per month. 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. Offers not available in MD, MS, NE, NV, WV.