Kevin Bennett is the CEO behind MotoRefi, and he wants to save you $100 or more per month. In this video, recorded on Feb. 4, Kevin joins Brendan Mathews from Motley Fool Ventures to talk about auto finance and start-ups. Kevin explains why you’re probably paying too much on your car loan and how you can save $100 or more per month. He touches on MotoRefi’s history, its latest financing, the post-COVID world, and how things have changed as the company has grown up. To close out, Brendan asks how COVID-19 has affected car ownership and the future of the used car. And along the way, Fool members ask questions.
Brendan Mathews: Welcome to Motley Fool Live. I think we will maybe just start with some quick introductions. Kevin is the CEO of MotoRefi which is a specialist in helping people save money by refinancing their car loans. This is a private company and full disclosure, it is an investment of Motley Fool Ventures and I am a vice president of Motley Fool Ventures which is an affiliate of The Motley Fool. Kevin, can you give maybe just a little bit more detail on what MotoRefi does?
Kevin Bennett: Absolutely. It’s great to be here. Thanks for having me on. MotoRefi is a digital auto refi platform that helps consumers improve their financial relationship with their cars. We primarily help consumers refinance their auto loans, as most consumers are actually paying above market rates based on what they get at the dealer.
Mathews: That’s a great segue, Kevin. I want to just do three chapters to this discussion. One, just focused on personal finance and auto refinancing, then we’ll go into your story as a venture back business, and then talk a little bit about the auto market. But let’s just start on a personal finance side. Why is it the people are in sub-optimal auto loans?
Bennett: It’s a great question. Most people get their auto loans at the car dealership. That’s the experience that the vast majority of consumers have, and it’s a vertically integrated transaction. Most consumers are spending months or weeks shopping around for their cars, predominantly, they’re looking online, looking for features, looking for the right models, right vehicles, whether it’s new or used, then they almost always end up at the dealership. At that dealership, they are not only signing contracts and picking up the car, but they’re also getting the financing and insurance products. The experience that most people have is that they’re in the last few minutes of the transaction, will go into the F&I office, and they will be wanting to drive off the lot, seeing that car, wanting the keys, really dying to get home with their new vehicle, but they’re stuck with a big stack of paper, talking to someone about financing, insurance products, all these things. Lot of acronyms get thrown around. Usually check, check, check, “Can you make this payment?” “Yes.” You may not even know what that interest rate is, and then you sign and drive off the lot. You know what your payment is but as I mentioned, you may not know your interest rate, you often don’t know all the insurance products you have just bought. In that few minutes, that’s actually where most auto dealers make all their money off you. They actually don’t make money on cars. That’s a little-known fact. Most people would assume that auto dealers make their money by selling cars, they don’t, they make their money by selling the finance and insurance products attached to the cars.
Mathews: Then the service associated with it. But yeah, I mean, [laughs] I have been in that little room, and you are exhausted, and you’re not a finance expert but they’ve got somebody who does it all day. A lot of people are in sub-optimal car loans. I see a lot of people are refinancing their home loans but I don’t hear about it as much with auto loans. How does auto refi compare to home refi?
Bennett: You’re exactly right. I think when you think about the consumer finance journey most consumers go on, they’ll often finance their education, they’ll finance their car, initially, they’ll finance their home, they’ll refinance their home. They don’t often refinance their car, it’s not something that’s as well known, but refinancing a home is quite well known and quite standard. Fifteen to 20% of mortgages get refinanced, only 1 to 3% of auto loans get refinanced, so a very small percentage. When you think about…