Persistent household affordability challenges are prompting a growing number of consumers to explore refinancing their auto loans as a way to reduce monthly payments. Auto loan debt in the United States now exceeds $1.6 trillion, making it one of the largest categories of consumer borrowing outside of mortgages, and borrowers who financed purchases during periods of higher interest rates are increasingly checking whether they can secure better terms.

Stephanie Roberts, director of auto products at PenFed Credit Union, told FOX Business that expanded access to credit information has made it easier for consumers to compare available rates when weighing whether to refinance.

"I think consumers from a credit education standpoint are more educated than ever on the health of their credit, so they're taking out those refinances," Roberts said. She noted that many banking and personal finance apps now provide consumers with regular access to their credit scores.

"A lot of lenders, PenFed included, are allowing for consumers to check their rate by way of soft pull… without any impact to their credit score or promises that I'm going to go through this process, and I think that's why a lot of people are now seeing that refinance is a fruitful option for them, where it hadn't been like that in the past," she added.

Roberts said PenFed is "proactively going after consumers where we can see that your rate is higher than what we have to offer in a pre-approval process." She emphasized the credit union's member-focused approach: "As a credit union, we care about our members' financial health, so we really want them to save money when they can, where they can."

Even modest monthly savings can compound meaningfully over the life of a loan, Roberts explained, particularly at a time when inflation continues to squeeze household budgets for essentials such as groceries and gasoline. "It doesn't sound like a lot initially, but when you think about it over the life of the rest of the loan, it really does add up," she said. "That $100 can go a long way when it comes to monthly expenses."

Improvements in vehicle durability have also contributed to making auto loan refinancing more viable. Cars retain more of their value and remain operational for longer periods than in previous decades.

"Cars are staying on the road longer than they ever have. Right now, the life of a car is about 13 years, there's just been enhancements in technology and engines and things that are keeping them on the road," Roberts said.

Affordability challenges associated with purchasing new vehicles are further encouraging consumers to hold onto their current cars longer, which means refinancing is "naturally coming into play as an option," she added.

Roberts outlined several key steps consumers should take before committing to a refinance.

"The very first thing that you should do is look at the value of your car," she said, pointing to a range of free tools available to consumers. This step helps determine whether refinancing makes financial sense, because "if you owe more than the value, it becomes a harder conversation." Being underwater on a vehicle — owing more than the car is worth — is a situation many borrowers face in the early years of a loan, and it can limit refinancing options or require additional steps to address the gap.

Second, consumers should review their pre-approval options to determine whether available interest rates are lower than what they are currently paying. This allows borrowers to assess whether refinancing is worthwhile given their equity position in the vehicle.

Roberts also advised consumers to consider whether extending the loan term during refinancing could make sense, as it may yield additional payment savings depending on the car's initial valuation. While a longer term can lower monthly payments, it can also increase total interest paid over the life of the loan, making the trade-off an important calculation.

Some lenders, including PenFed, offer a cash-out refinancing option, which Roberts said can even take the form of a title loan for vehicles that are fully paid off. This alternative can be attractive for consumers who might otherwise rely on a personal loan or credit card to access funds, she noted.