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The Best Way to Lower Your Monthly Car Payment Today

Finance | 09/13/2022 22:00
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If you have financed your vehicle, you may feel overwhelmed by your monthly payments. When you add on gas, insurance, and maintenance, your car can quickly eat up your monthly income. But there are a few ways to get a lower car payment and loosen up your monthly budget.

Here are the best ways you can lower your monthly car payment.

Signing a lower car payment

What is a high car payment?

You might be wondering if your car payment is higher than it should be. There is no hard and fast number that constitutes a “high” car payment, and it will depend a lot on what your finances and your budget look like.

In general, it is recommended that you should spend more than 10-15% of your monthly income on your car payment. Your total transportation expenses (gas, insurance, maintenance) should not exceed 20% of your monthly income. So if your car payment is over 15-20% of your monthly income, you are probably out of your budget with car payments.

But if that rule is a bit too cut and dry for you, look at your own personal budget to make the call. Consider all of your income and all of your expenses: the variable expenses (such as groceries and entertainment) and the fixed expenses (such as rent and insurance). If you are spending more than you are bringing home every month, it is safe to say that you need to fix your budget and find a way to reduce your monthly car payments.

Top three ways to lower your monthly car payment.

#1. Try renegotiating 

It never hurts to talk to your current lender about your money situation (and don’t be embarrassed, it happens more than you might think). There might be a few things that they can do to alleviate your situation. Sometimes they will let you defer payments for a few months, but you will still accrue interest during this time so it will end up costing you more overall. 

Lenders may let you renegotiate certain terms of your loan, but in this case it’s better to apply for refinancing with a few different lenders, as they may be able to beat your current lender.

#2. Sell your car or trade it in

If you anticipate having a long term issue with car payments, it might be a good idea to sell your car privately or trade it in at a dealership.

If you choose to sell your car, make sure you clean your car thoroughly ahead of time and take good pictures that will highlight your car’s best features. Do some research on Kelley Blue Book or Edmunds to find what a fair resale value will be. Call your lender to find out exactly how much you have left on your loan so you know how much you owe (and how much you should try to get when selling your car).

Alternatively you can choose to trade your car in. This is a good option if you still need a new car but cannot afford your current loan. It is important to know beforehand how much is left on your current loan and what the resale value of your car is.

#3. Refinance your loan

Refinancing your car loan is the best way to lower your monthly car payment. It is much easier than selling your car and much more effective than trying to negotiate with your current lender.

When you refinance your loan you want to apply with 3-5 lenders to get the most competitive rates. It is best to use a company that specializes in vehicle loan refinance, as they will have relationships with many lenders and can help you pick the best loan for your situation.

Refinancing will be most effective if you are prepared. Take the following steps to make sure you get the best car loan refinance offers:

  1. Make sure your credit score is in good shape. The higher your credit score is, the better car loan APR you will be offered. Make sure you are paying your bills on time and in full (scheduling autopay is a great way to do this), pay down your debts that have the highest credit utilization ratio, and check your credit report.

  2. Know your current loan terms. You should know your current monthly payment, the amount of time you have left to repay, the car loan APR, and if there are any prepayment penalties for which you may be responsible. Call your lender if you have questions–you don’t want to refinance if the fees will outweigh your savings.

  3. Collect any documents you may need. You will most likely need a photo ID, your vehicle’s information (bill of sale, VIN number, make, model, and year), your proof of income and financial history (pay stubs, banking information, and your credit report), proof of residence, and proof of insurance.

  4. Research lenders. You won't be able to compare loan terms until you actually apply, but you can look around online for different credit unions, traditional banks, and online lenders. See what some of the average rate offers are, and see what their customers have to say. Customer satisfaction ratings are very important, so don’t ignore this step. Using a company that specializes in auto loan refinance can make this step much easier.

  5. Apply and compare. Once you have completed your research you can start applying. Be sure to apply in a fourteen day window so that all of your applications will count as one hard inquiry on your credit account. When the offers come in, look at the interest rate, the repayment period, the prepayment penalties, the fees, and the customer reviews to decide what loan is right for you. 

  6. Sign and save. Once you pick a loan that is right for you, all you have to do is sign and start saving. And if you use Auto Approve to refinance your loan, they can help you fill out all of the paperwork (even the DMV paperwork!)

Refinancing is the easiest and most effective way to reduce your monthly car payments. It allows you to shop around and compare offers so that you know you are getting the best terms possible. And when you have a company that specializes in car loan refinance it is quick and easy.

What’s the smartest way to pay off a car early?

Paying off your car loan early can save you a lot of money in the long run. If you don’t need to worry about lowering your monthly car payments, you should focus on paying off your car early. Here are our top tips for paying off your car loan early.

Make at least one large payment over the term of the loan. 

Making one large lump payment will help reduce the amount of interest you are paying. This will be most effective to do early on in the loan term, as the earlier you do it the more drastically you will reduce the interest you owe.

Make at least one large payment every year.

Do you have a yearly bonus? Do you usually end up with a tax refund? Consider using that money to make an extra payment on your car loan every year.

Round up your monthly payments.

Rounding up your payments every month will help you slowly chip away at the principal you owe. If your car payment is $520 a month, consider paying $550 a month. The extra $30 will go towards your principal and help you pay your car off earlier while not affecting your monthly finances too much.

Pay half of your monthly payment every two weeks.

This may sound strange, but hear us out. If you make a half payment every two weeks, you will actually end up making an extra payment every year. Instead of 12 full monthly payments you will make 26 half payments, or 13 full payments. This is another way to subtly pay off more of your principal without affecting your monthly budget too drastically.

Never skip a payment.

We know that some months are tight, but skipping a payment can really make you fall behind and cost you a lot of money. See if there are other areas of your budget that you can pull from to make your payment. If you are having issues with your monthly payments, try to refinance instead.

Those are the top ways to lower your monthly car payments and manage your money more effectively.

Refinancing your car loan is your best bet when it comes to securing a lower monthly car payment. It allows you to shop around and compare terms so that you can be sure you are getting a better loan while allowing you to keep your car. If you think refinancing your vehicle is a good move for you, be sure to prepare ahead of time to ensure you get the best loan offers possible.

Auto Approve is here to help with your car loan refinance, so fear not! Our experts can lead you through the process to make refinancing your car a breeze. So don’t wait, contact Auto Approve today to see how much money you could be saving!


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*APR and Fees Disclosure: Auto Approve works to find you the best Annual Percentage Rate (APR), which is based on factors like your credit history, vehicle and desired payment terms. Fees to complete your loan refinance vary by state and lender; they generally include admin fees, doc fees, DMV and title. Advertised 6.24% APR based on: 2019 model year or newer vehicle, 730 minimum FICO credit score, and loan term up to 72 months. All loans subject to credit and lender approval.
Auto Approve has an A+ rating with the BBB and is located at 2860 Vicksburg Lane North Plymouth, MN 55447. Auto Approve works to find its customers the best terms and APR, which are based on factors like credit history, vehicle, and desired payment terms. Loan amounts, costs, and fees vary by state and lender; they generally include admin fees, doc fees, DMV, and title fees, depending on the lender and period of repayment. There is no fee to obtain a quote and all refinancing-related costs are included in the amount financed so there are no out-of-pocket costs! For more information, please go to AutoApprove.com.