If you’re trying to purchase a new-to-you car, you can appreciate just how painfully expensive it’s going to be. You can expect an average new car payment to be over $700. If you’re looking for a used vehicle, that’s close to $550. That’s likely too much for your budget. These are 12 tested ways to reduce your car payment that will leave more cash in your budget.
Table of Contents
Purchase a Car You Can Afford
The easiest way to lower your car payment is to select a car you can truly afford. Determine how much you can sustainably spend each month.
Limit your search to cars within that budget, and don’t waver when making the purchase.
Choose a Longer-Term Loan
It’s typically best to pay off your car as soon as possible. However, if you’re struggling to fit the payment into your budget, consider lengthening the loan.
When you can, increase your payment so that you can mitigate the additional interest that comes with a longer-term loan.
Make a Larger Down Payment
Putting nothing down on your new car purchase is convenient, but it only increases the loan amount. Making a larger down payment lowers the amount you need to borrow. It may also make you look like a better risk to the lender and lower the interest rate.
Start saving cash in an online savings account to grow your money as much as possible to help you come purchase time.
Improve Your Credit Score
Your credit score has a direct impact on the interest rate offered by your lender. Improving it will help you score a lower rate and help you save money on interest.
Aim to have a credit score of at least 720 to get the best rates.
Used cars are usually lower in cost than new ones. Purchasing used often lets you borrow less and lowers your monthly payment.
You may not have that new car smell, but is it really worth the extra cost?
Lease Instead Of Buy
Many financial experts oppose leasing over buying because it locks you into a continuous cycle of payments. However, payments are typically lower than an outright purchase.
Just make sure you do your due diligence before leasing. You may face certain restrictions that make leasing problematic.
Compare Multiple Lenders
Don’t just settle for the first rate offer you receive. It’s okay to shop around and compare multiple lenders before taking out a car loan.
As long as you compare them all within a 45-day window, it only counts as one hard credit check. Doing so may help you score a lower rate.
Make Extra Payments
Most lenders allow you to make extra payments on your auto loan without a fee. Doing this applies extra money to the principal of the loan.
This lowers the amount of interest charged and helps you pay off the loan quickly.
Sell Your Current Car
Having a bloated car payment can be ruinous on a budget. If that’s your current predicament consider selling your car and downgrading to a more affordable option.
You can sell to a dealer, but you will commonly receive more via a private sale. Sell the car, pay it off with the profits, then purchase a more economical set of wheels.
Refinance Your Loan
Depending on your interest rate, you may be able to reduce your interest rate through a refinance. This is less of an opportunity in a high interest rate climate.
However, if your credit score was lower when you initially took the loan, you may still reap some savings.
Talk to Your Lender
Are you finding your monthly payment a challenge to manage? Talk to your lender to see what they might be able to do to help.
They may be able to defer your payment for a month or provide another solution. While not perfect, it may provide some relief.
Work Dealers Against Each Other
Dealers want to sell you a car as much as you need to purchase one. If you have multiple dealers in your area, play them against each other to see who will give you the better deal.
Email local dealers to see what they can quote you for a price. This may take some creativity, but the effort can be well worth it.
Get Cash Back On Your Gas Purchases
It’s painful to fill up at the pump. Thankfully, there’s an app for that! With Upside you can get rebates on your gas purchases that you can redeem for cash.
Pay Off Your Car Loan Faster
Do you hate making that monthly auto loan payment? You can pay it offer quicker with some extra effort. Here are ten easy ways to eliminate your car loan for good.
How to Get Free Gas at the Pump
Yes, it is possible to get free fuel at the pump. Here are nine legit ways to get free gas, or greatly reduce your overall cost.
Ways to Make Your Car Last Longer
Do you want to ensure your car has a longer life? Here are 11 simple tips to extend the life of your car and save money in the process.
Say Goodbye to Car Loans
Do you hate having a monthly car payment? There is a way to avoid having one. Here’s how to pay cash for a car and eliminate payments.
I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.