How to lower your car payment (2024)

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With average monthly payments on a new-car loan recently surpassing $640, you may be looking for ways to lower your car payment.

In the fourth quarter of 2021, new-car payments averaged $644 per month and used-car payments weren’t far behind at an average of $488 per month, according to the Experian State of the Automotive Finance Market report.

If you’re struggling to make payments on your current auto loan — or if you’re shopping for a car loan and want a lower payment than what you’re being offered — there are several possible ways you might be able to lower your car payment.

Lower your car payment before you buy

Choosing a less-expensive car is one way you could save money each month — but there are a few other ways you may be able to get a lower monthly payment on your next car purchase.

Shop around

It could pay to comparison shop. Reviewing offers from different lenders, like banks, credit unions, online lenders or dealerships, allows you to compare key loan factors that could affect your total monthly car payment. These include the loan amount, annual percentage rate and the length of the loan.

The best place to get a car loan

If the offers you’re getting still don’t fit into your budget, consider taking some time to improve your credit health. This could help you get lower interest rates and, in turn, lower your monthly payments.

Choose a longer loan term

Opting for a longer loan term of 72 months or 84 months could help you reduce your monthly payments — but you’ll end up paying more total interest. And when you stretch out your loan term, you may be charged higher rates, too.

Choosing a longer loan term also puts you at risk of becoming upside down on your loan. Your car could depreciate more quickly than you pay off your loan, and you’d end up owing more than the car is worth.

Make a down payment

Saving up cash for a car down payment is a great way to lower your monthly auto loan payments. The more you put down upfront when you buy a car, the less you need to borrow.

For example, if you put $5,000 down on a $20,000 car, you would only need to finance and pay interest on $15,000. If you got an interest rate of 4% and loan term of 60 months, your estimated monthly payment would be $277.

In comparison, if you made no down payment and financed $20,000 with the same interest rate and loan term, your estimated monthly payment would jump to $369 — that’s $92 more each month.

Lower your current car payment

If you already have a car loan, but you’re having trouble making your monthly auto loan payments or need some extra cash in your pocket each month, consider these options.

Talk to your lender

If you’re behind on your current auto loan or at risk of missing a payment, discuss your financial situation with your lender or loan servicer as soon as possible.

Your lender may be able to work out a payment plan or offer you other options to help you get back on track. The Consumer Financial Protection Bureau suggests asking how any options your lender offers could affect your credit reports.

Refinance your auto loan

Refinancing your existing loan might reduce your monthly payments. If interest rates have dropped since you got your original loan, your credit has improved, or you just aren’t confident you got the best possible rate to begin with, you may be able to get a new loan with a lower rate and better terms. Keep in mind that refinancing involves opening up a new loan with new terms — that means the potential for brand-new loan fees on top of interest you’d pay. And if you end up extending your loan term and are able to lower your monthly payments, you’ll be paying interest for longer.

Want to lower your monthly payment?Shop Refinance Options

Trade in your car for a lower-priced vehicle

If you have positive equity in your vehicle, meaning your loan balance is less than the car is worth, you may be able to lower your monthly payment by trading it in for a less-expensive car.

Say you owe $5,000 on your auto loan and your vehicle is currently worth $8,000. You’d have $3,000 of equity that you could use as a down payment toward another car. A down payment reduces how much you need to borrow, and if you choose a more budget-friendly vehicle, you may be able to lower your monthly payments even more.

What’s next?

Whether looking for a new-car loan or ready to refinance, take the time to apply for prequalification and compare offers from multiple lenders to find a loan that fits your budget.

Check for auto loan refinance offersView Estimated Loan Terms

About the author: Sarah Archambault is a freelance writer based in New England. She enjoys learning new ways to spend money wisely and helping others figure out how to make smart financial decisions. Sarah is a graduate of the Newhouse… Read more.

How to lower your car payment (2024)

FAQs

How do I lower my car payment? ›

How To Lower a Car Payment: 8 Ways to Get it
  1. Sell Your Car. Of course, you won't have a car payment if you don't have a car. ...
  2. Trade in Your Vehicle. Another option is to trade your car in for a cheaper one. ...
  3. Shop for the Lowest APRs. ...
  4. Choose a Minimal Loan Amount. ...
  5. Put More Money Down. ...
  6. Get a Longer Loan Term. ...
  7. Our Methodology.
Sep 1, 2024

How do I get out of a high car payment? ›

  1. Renegotiate the loan terms. If you're experiencing financial difficulties, your lender may be willing to change your payment schedule. ...
  2. Refinance your auto loan. ...
  3. Sell the car. ...
  4. Agree to voluntary repossession. ...
  5. Pay off the loan.
May 30, 2024

Can I lower my monthly car payment by paying extra? ›

Will my car payment go down if I pay extra? Your car payment won't go down if you pay extra, but you'll pay the loan off faster. Paying extra can also save you money on interest depending on how soon you pay the loan off and how high your interest rate is.

Is $600 car payment too much? ›

How much should you spend on a car? Whether you're taking out an auto loan or a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600.

What is considered a high car payment? ›

According to experts, a car payment is too high if the car payment is more than 30% of your total income. Remember, the car payment isn't your only car expense! Make sure to consider fuel and maintenance expenses. Make sure your car payment does not exceed 15%-20% of your total income.

Can I negotiate a lower car payment? ›

Renegotiating your loan terms, refinancing or making extra payments can help lower your car payment. You can also sell your current car and buy one with a more budget-friendly payment but watch out for high interest rates. Before you buy, shop around and save for a large down payment to keep your car payment low.

How to get auto loan forgiveness? ›

Lenders are unlikely to completely forgive your loan unless you turn your car in (which we'll talk about later on). They may work with you on your payment size or due date, loan terms or deferment instead.

What if my car payment is too much? ›

If your monthly payment is overextending your budget, there are ways out. Consider the following options to take if your vehicle payment is too expensive. Refinance your loan: Refinancing your vehicle loan is taking out a new loan to replace your current one, but with rates and terms that better fit your budget.

How can I get rid of a car I owe too much on? ›

Selling a vehicle and using the proceeds to pay off the loan in full can help you eliminate the debt without hurting your credit. You might also consider trading in the vehicle and rolling negative equity into a new car loan to avoid credit score damage; however, that can leave you with more debt to repay.

How much is a $30,000 car payment for 5 years? ›

Provided the down payment is $5,000, the interest rate is 10%, and the loan length is five years, the monthly payment will be $531.18/month.

How to pay off a 6 year car loan in 3 years? ›

If you want to pay off your loan early, here are six ways to make it happen:
  1. Refinance your car loan. ...
  2. Make biweekly payments. ...
  3. Round up your payments. ...
  4. Put extra money toward a lump-sum payment. ...
  5. Continue making your monthly payments. ...
  6. Opt out of any unneeded add-ons.
Jun 25, 2024

What happens if I pay an extra $200 a month on my car loan? ›

Paying extra toward the principal won't lower your monthly car payment. It may save you money in the long run by shortening the loan.

What's a good monthly car payment? ›

How much of my salary should I spend on a car payment? According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%.

Is $1000 a month a lot for a car? ›

For large luxury models, $1,000-plus payments are the norm. Even a handful of buyers with subcompact cars have four-figure payments, likely due to having shorter loan terms, poor credit, and still owing money on previous car loans, according to Edmunds analysts.

Is $1,000 a high car payment? ›

A near-record 17% of car owners are paying more than $1,000 a month, according to Edmunds, a car shopping site and industry data provider.

How much do you have to put down to lower your car payment? ›

It's good practice to make a down payment of at least 20% on a new car (10% for used). A larger down payment can also help you nab a better interest rate. But how much a down payment should be for a car isn't black and white. If you can't afford 10% or 20%, the best down payment is the one you can afford.

Is it possible to renegotiate a car loan? ›

Renegotiate your loan terms

Many lenders offer debt restructuring options that can help you change your loan terms to make them more affordable while you get back on your feet.

Is refinancing a car a good idea? ›

Refinancing and extending your loan term can lower your payments and keep more money in your pocket each month — but you may pay more in interest in the long run. On the other hand, refinancing to a lower interest rate at the same or shorter term as you have now will help you pay less overall.

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