CLEVELAND — Here’s just another sign that cash-strapped consumers are searching for ways to stretch their dollar even further.
I've learned that many car owners are now looking to extend their loans through refinancing.
"Very few people have actually done it, but there's 100 million consumers with car loans out there. They can very simply come to Caribou. They can check rates and figure out if they can get a savings on their car payment. And on average, we save customers about $151 a month on their car payment," said Caribou CEO Simon Goodall.
Caribou, an auto refinance company, reported that demand for its services has been off the charts.
And for the first time, Caribou saw 84-month refinance terms have become the most popular choice among borrowers.
As for why?
Caribou says stressed-out Americans are looking for financial flexibility by freeing up funds to offset the impacts of inflation and rising healthcare costs.
"We hear some amazing stories of customers that are under pressure and this unlocks their ability to buy a new house, to pay for a new for diapers for newborns or pay necessary medical expenses," said Goodall.
Goodall said Caribou is giving its customers a simple, accessible way to stay on top of their finances without turning to higher-interest debt.
Saving money on that monthly car payment sounds great, but Consumer Reports experts advise looking at the numbers before signing a seven- or eight-year loan commitment.
In an article titled "Why an 84-month Car Loan is an Expensive Risk," they lay out potential pitfalls like higher total interest paid, a higher risk of owing more than the vehicle is worth, and maintenance costs when the car is older.
NerdWallet recommends financing new cars for no more than 60 months and used cars for no more than 36 months.
Here's a quick breakdown to see the difference in loan length.
A $35,000 car financed at 9% for 48 months will cost you $6,800 in interest. The monthly payment would be $871.
To get a cheaper option at $563 a month — saving you more than $300 a month — you could extend the same loan rate to 84 months, but you'd pay a whopping $12,300 in interest.
However, according to Caribou, the "reality is people are trying to manage monthly budgets, and extending their loans helps achieve this for them in a major way."
