SAN ANTONIO – As the cost of owning a vehicle continues to climb, many Texas drivers are struggling to keep up with monthly payments and insurance premiums.
The average price of a new vehicle frequently tops $50,000, according to data from Kelley Blue Book. Texas now ranks among the top 10 states with the highest car payments, adding financial pressure to families already dealing with rising insurance premiums and fuel costs.
“It’s a lot of money,” said Simon Goodall, CEO of financial technology company Caribou. “Owning a car has never cost more than it does right now. You’ve got car prices up, rates are up, payments are up, and for consumers, that math has just stopped working.”
Goodall said that over the last five years, car prices have increased by 22%, new-car payments are up by 33%, and auto insurance costs have climbed by 56%.
Combined with higher gas prices, many drivers are exploring refinancing options to lower their monthly payments.
Goodall said refinancing is not always about securing the lowest interest rate.
“What we find is for customers, it’s a lot about giving themselves breathing room in their finances,” he said.
According to Goodall, there are several reasons consumers may consider refinancing, including lowering monthly payments to free up cash, managing an underwater auto loan or taking advantage of an improved credit score to reduce loan costs.
Goodall said that drivers with high-interest credit card debt may benefit from refinancing their vehicle loan and redirecting the savings to pay down other balances faster.
“If you carry a lot of credit card debt at high interest rates, you’re better off refinancing your car, getting your payment down, and putting that extra money towards paying off higher-interest-rate credit cards,” he said.
At the same time, Goodall said more drivers are stretching auto loans to seven years or longer in an effort to make payments more manageable. However, the problem with those log car loans, he says, is that you’re barely paying down the principal balance while your car depreciates in value.
According to Caribou, Texas residents who refinance through the company save an average of $162 per month.
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