If your monthly car payment has you struggling to make ends meet every month, you might be wondering how you can get a lower car payment. Maybe your income unexpectedly decreased; maybe your other expenses have unexpectedly increased; or maybe you just flat out got in over your head.
Whatever the reason is, rest assured that there are ways to help you get out of a high car payment!
Let’s start with the basics. A car loan is a secured loan that can help you finance a new or used car. A lender will pay for your car and you will repay them in monthly installments with an additional fee, the interest, which is what incentivizes them to loan you the money in the first place. Your car acts as collateral and if you cannot repay the lender, your car will be taken away as repayment. The fact that your car acts as collateral is what makes this a “secured” loan.
Your monthly car payments depend on three main factors: the principal of the loan, the interest rate on the loan, and the length of the loan term.
Car payments are calculated by adding up the principal of the loan (this includes the price of the car plus any taxes and fees, minus the down payment) plus the total interest due over the length of the loan. It is then divided up by the amount of months in the term.
Car payments were higher at the end of 2021 than they have been in a long time. In fact, according to Experian’s State of the Automotive Industry, the average monthly car payment jumped from $567 at the end of 2019 to $644 at the end of 2021. That’s a 14% increase in just two years!
The main reason that car payments are so high right now is simple: cars are just more expensive today than they were a few years ago. Much of this increase in price is a result of the infamous computer chip shortage: a shortage in computer chips meant that cars were (and still are) taking longer to build. This increased demand and in turn increased prices.
But putting the cost of cars aside, there are a few other reasons that your car payments might be so high:
But whatever the reason is, fear not! We have some helpful tips on how you can get off the hook for your high car payments and help you secure lower car payments. After all, we could all use some extra money in our pockets, right?
The first step you can take is to simply talk to your lender. Communication is so important, and if you are upfront and honest with your lender, they might be willing to work with you. The lender may allow forbearance, where they will temporarily reduce your payments (or even put a temporary pause on repayment). Be sympathetic in your plea: they may surprise you with their leniency.
If your money issues aren’t a temporary issue, a pause on repayment will probably not help you a whole lot. Your car might simply be too expensive for you. And if that’s the case, selling your car might be a good option for you. The following may help you get the best price for your car:
Selling your car can be a great way to get those pesky monthly payments off of your back. But remember: you most likely still need a car to get around. Be sure you can find something that is within your budget before you sell your only way to get around.
Another great option to to get a lower car payment is to refinance your car loan. Refinancing is when you pay off an existing loan with a new loan, one that ideally has better terms. So if your car loan APR is too high or your repayment period is too short, refinancing is the best option for you to get better terms.
Here’s how to know when the time is right to refinance:
Getting a lower car loan APR can save you a lot of money over the length of your car loan. But be wary of refinancing if any of the following apply to you.
So, should you refinance your car?
Refinancing is a great way to ensure lower monthly car payments. To be sure that you get the best car loan APR possible, use a company that specializes in auto refinancing, like Auto Approve. We have relationships with lenders all across the country, which means we can secure you the most competitive rates out there. But don’t just take our word for it–with a 96% would recommend rating on LendingTree and an A+ rating on Better Business Bureau, you know our customers are satisfied!
Saving money is more important than ever nowadays. And refinancing your car is an easy and effective way to cut costs and get lower car payments every month so that you have more money to spend on things that matter. So don’t wait to cut costs – get started today with Auto Approve!