Interest rates have dropped again: What it means for your car loan and beyond

What just happened?

On December 10, 2025, the Federal Reserve cut its target for the federal funds rate by 25 basis points, bringing the range down to 3.50 %–3.75 %. This marks the third reduction in 2025. The first took place in September 2025, when the range was lowered to 4.00%–4.25%, followed by October 2025 when the range was lowered to 3.75%-4.00% . The decision reflects growing concern within the Fed about signs of weakening in the U.S. labor market, while inflation remains elevated.

This rate cut comes amidst significant political and economic changes. President Donald Trump’s proposed policies, such as import tariffs and tax cuts, are widely expected to drive inflation higher.

With the latest rate cut, there’s a great chance to lock in lower borrower rates and get a bit more financial flexibility. Over the last six months, Caribou customers have been scoring impressive savings on their annual percentage rate (APR), and with this rate drop, there’s no better time to think about refinancing your auto loan.

How does this affect auto refinance rates?

Even before these recent Fed rate cuts, based on our Auto Trends Report, we’ve seen APR savings skyrocket in recent months, so don’t miss out on this opportunity to refinance your auto loan and lower your car loan payments.¹

If you’ve been on the fence about refinancing your car loan, this could be the right time to consider taking the next steps. This rate drop—along with other factors such as improved credit report scores, changing your loan term, or switching to a lender with lower rates—could translate into significant savings for you and give you the freedom to focus your money on what matters most to you.

Why the Fed’s expected rate cut matters for your car loan

When the Fed cuts rates, it generally leads to lower interest rates across various financial products, including auto loans. Here’s why that matters:

• Lower monthly car payments: A drop in interest rates could mean lower monthly payments, putting more money back in your pocket each month. Through Caribou, refinancing your auto loan at a lower rate could result in immediate and noticeable savings. Join other Caribou customers saving an average of $151/month.*
  
• Reduced interest over time: Beyond monthly savings, a lower rate means you’ll pay less in interest over the life of your auto loan. This could amount to hundreds or even thousands of dollars saved, depending on your loan balance and term. This also puts you in a better position if and when you trade in your car in a better position if and when you trade in your car.

Other reasons you might qualify for lower car loan rates now

While the Fed’s expected rate cut is a big factor when considering refinancing, there are other reasons you might qualify for lower rates:

• Improved credit score: If your credit score has improved since you took out your original loan, you may now qualify for a better auto loan rate. A higher credit score can significantly reduce your interest rate, leading to even more savings.
  
• Market conditions: Even without the Fed’s rate cut, current market rates might be lower than when you first financed your car. Checking today’s rates could reveal a better deal that saves you money.
  
• More options through Caribou: Caribou’s large and diverse network of high quality lenders means you have access to multiple offers, making it easier to find a new car loan that best fits your needs. Different lenders have different criteria, so exploring your options through Caribou can help you find a rate that fits your budget.

How to take advantage of lower rates

With the new Fed rate cut, now’s a great time to check for a lower rate. Here’s how Caribou makes it easy:

• Check your rate in minutes: Through Caribou, you can check your personalized auto loan rates quickly and easily—with no impact on your credit score† This gives you the chance to see potential savings without committing upfront.
  
• Fast and simple process: Refinancing through Caribou is designed to be fast and hassle-free. You can complete the entire loan application process online in just a few days, making it quick and easy to take advantage of the rate drop.
  
• Defer your next payment: Refinancing your car might also allow you to defer your next car payment and free up cash flow for your savings account or other financial goals.^
  
• Consider longer terms: If you’re looking to lower your monthly payments even further, you might consider extending your loan term. However, keep in mind that while this can provide short-term relief, it may result in paying more interest over the long term.