How to Get a Lower Car Payment: 4 Ways

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A high car payment can be a drain on your budget. Fortunately, there are simple steps you can take to reduce it, such as refinancing. And if you haven’t taken out a loan yet, you can get started with a low monthly payment by shopping around and finding the right lender.

4 Ways to Lower Your Current Car Payment

Your car payment is not set in stone. It can change – you just need to talk to your lender or take extra steps to make it more manageable.

1. Re-negotiate the terms of your loan

Lenders often allow you to defer payment when you are facing financial difficulties. This may ease the strain for a month or two, but could result in you paying more overall as interest continues to accrue during the deferral.

You can also request a modification of your loan. Your lender may be willing to extend your term – meaning you pay more interest – or lower your interest rate. The latter is better for saving money over the life of the loan, but it can be difficult to qualify if you don’t have good credit.

2. Refinance your car loan

There are two ways that refinancing your car loan can help lower your monthly payment. You can get a lower interest rate with the same remaining term on your current loan, meaning you pay less each month.

Or you can refinance the loan for a longer term. This will make your monthly payments lower, but you’ll pay more in interest overall.

3. Sell or trade in your car

If your car is over your budget, you can always sell it and upgrade to a more affordable vehicle. The most convenient way will be to exchange your car at a dealership. You’ll be able to use that extra cash as a down payment on your next car, and you won’t need to do a private sale.

But private sales can make you more money. Just know that selling a car with a lien on it can be complicated. Talk to your lender to make sure you’re not breaking the terms of your contract.

4. Make additional payments when possible

Accelerating your car loan will help you lower your future monthly payments – or skip them altogether. Although many lenders apply additional payments to the interest only, you may want yours to go directly to the principal.

This will help reduce the total amount you owe. It will also give you much-needed freedom of movement in the future.

How to get a lower car payment before you buy

Shop smart to get a low down payment on your next vehicle. You don’t have to take the first loan that comes your way, and keeping the amount you finance is a great way to lower your monthly costs as well.

  • Buy a used vehicle. Not only is it significantly cheaper up front, but buying a used car will also help you avoid the huge drop in value that new cars face.

  • Make a big down payment if you can. The more you pay upfront, the less you’ll need to finance—which means lower monthly payments.

  • Trade in your current vehicle or sell it privately. Using your current trip to increase your down payment is a great way to keep your next monthly payment low.

  • Improve your credit score before applying for a loan. Lenders and dealerships will give you better rates when you have good or excellent credit. If you can, wait to buy a car until your score jumps a few points.

  • Shop around for the best financing. Don’t limit yourself to dealership financing. You increase your chance of getting a good interest rate and flexible monthly payment by shopping around.

  • Choose a longer loan term, but keep in mind that this means a higher interest rate. While you’ll be able to lower your monthly costs, you could be paying thousands more than your car is worth with a loan term of over 60 months.

  • Pay sales tax in advance. Lenders will allow you to finance the sales tax on your vehicle, but try not to. You’ll end up paying interest on it, too—and that’ll just make your monthly payment bigger.

  • Rent instead of buy. Leasing gets a bad rap, but you can save money on your monthly lease payments. However, it can be costly if you don’t have good credit—and you won’t be able to sell your car at the end of the lease term.

The bottom row

Since cars should take up less than 25 percent of your total budget, it’s extremely important to keep your monthly payment low. Refinancing or renegotiating are two of the best solutions if you have taken out a loan with a high interest rate. But switching to a more modest vehicle is also a solid option that can put more money in your pocket each month.

If you’re on the hunt for a new or used car, consider the total cost and save for your down payment before you shop. You’ll pay less interest and start with a low monthly payment.

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