With the average new car payment reaching $648 per month according to Experian, many drivers are thinking about how to lower car payments. The good news is that there are ways to lower your car payment whether you’ve had a loan for a couple of months or a couple of years.
Refinancing is one of the easiest ways to get a lower car payment. We at the Home Media reviews team have compared the best refinance auto loan companies to help drivers find the right options. In this article, we’ll cover a few ways to lower your car payment, including refinancing.
How To Lower Your Car Payment
You might feel stuck paying the same amount for your car each month. But there are a few things you can do to lower your car payment depending on your situation. If you’re having a hard time making payments, the first option is to talk to your lender. Beyond that, you can refinance your car, sell it or trade it in.
Negotiate With Your Current Lender
You should reach out to your current lender first if you’re having trouble making your car payments. Your lender may be able to grant you a temporary forbearance or work with you to lower your payment for a short time. However, if you just want to save money and aren’t experiencing financial hardship, the lender probably won’t lower your car payment.
Refinance Your Car
Another good option for lowering your car payment is to refinance your loan. A refinance auto loan replaces your original loan with a new one. In the ideal scenario, you’d get a lower interest rate, which could lower your car payment and save you money on total interest .
However, if your rate is about the same or worse, you’ll have to extend your loan term to lower your monthly car payment. This means you’d take longer to pay off your remaining principal, and that would increase the total interest you’d pay. We don’t recommend doing this because you could become upside down on the loan, which is owing more on your car than it’s worth.
Sell Your Car or Trade It in
Of course, you won’t have a car payment if you don’t have a car. While it isn’t feasible for everybody, selling your car is one way to get rid of the car payment altogether. Make sure your car’s value covers the remainder of the loan. Otherwise, you’ll need to pay the difference in cash or finance it with a personal loan.
Another option is to trade your car in for a cheaper one. As long as you end up financing a smaller amount than what you have on your current auto loan, you’ll likely save money on car payments each month. If you have equity in your car beyond what’s owed on the loan, you can use that plus a down payment to pay for a used car without taking out a second loan at all.
How To Get Rid of a Car Payment
If you want to get rid of your payment completely, there are a few things you can do. You can get out of your car loan if you:
- Sell your vehicle
- Pay the loan off early
- Turn your car in to the lender through voluntary repossession
- Trade your car in and pay for the next vehicle with cash and any equity above your loan balance
How To Avoid Paying Interest on a Car Loan
If you have excellent credit, you may qualify for 0% APR car loans for specific term lengths. You have to pay the entire balance off within this period to avoid paying interest. If you can’t get one of these deals, you can minimize the interest you pay by making extra payments and paying the loan off early.
Will My Car Payment Go Down if I Pay Extra?
Your monthly car payment won’t go down if you make extra payments because each installment of the loan stays the same for the loan’s duration. But you will pay the loan off sooner and save money on interest. Some lenders include prepayment penalties, so check for those first.
How To Get a Lower Payment on a New Car
If you’re considering buying a new car, you have some control over what your payment will be. The total loan amount is the biggest factor in your monthly car payment. This is followed by the interest rate you’re approved for and the loan term you choose. Here are some ways to have lower car payments on a future purchase.
Shop for the Lowest APRs
According to Experian’s State of the Automotive Finance Market report, the average annual percentage rate (APR) in the first quarter of 2022 was 4.07% for a new car loan and 8.62% for a used car loan. The APR combines the interest rate with any fees annualized over the loan term, and it represents the total cost of borrowing the money.
Auto loan APRs vary depending on your credit history, but they also vary a bit depending on the lender you work with. We recommend comparing a handful of prequalifications when you shop for a new or used auto loan.
You can also complete multiple auto loan applications within a certain time frame and the hard inquiries will be combined into one on your credit report. This time period is 45 days for FICO® credit scoring models and 14 days for Vantage models.
Here are the average APRs by credit score for new and used cars according to Experian’s report:
Choose a Minimal Loan Amount
It’s exciting to dream about the latest features and finishes, but if you want a low monthly car payment, we recommend borrowing as little money as possible. In other words, pick an affordable car.
Maybe you can get by with a used Jeep Wrangler Sport instead of a new four-door Rubicon, for example. A well-maintained and reliable used car is the smartest choice for lowering your car payment on your next vehicle.
Put More Money Down
Another important component in your monthly cost is your down payment. The more money you put down, the less you’ll have to finance. Let’s say you put 10% down on a $10,000 loan at a 4% APR for 60 months. You’d finance $9,000, and your monthly payment would be $165.75.
If you put 20% down, you’d finance $8,000, and your monthly payment would be $147.33. You’d also save more than $100 in interest. The short-term pain of putting more money down rewards you with a long-term gain of lower monthly car payments and less total interest.
Get a Longer Loan Term (But Know the Risks)
There’s one other option to consider when figuring out how to lower your car payment with a new loan. If you choose a longer loan term, you’ll pay less per month, all else being equal. So a 60-month term has smaller payments than a 48-month term, while a 72-month term has even smaller payments than a 60-month term.
But longer terms will always cost more in total unless you can get a lower rate or make a bigger down payment. Financing $10,000 at 4% APR over 48 months will cost you $837.95 in interest. However, financing the same $10,000 at 4% APR over 72 months will cost you $1,264.53 in interest. The issue is compounded when you finance larger sums of money or have a higher interest rate.
Conclusion
Knowing how to lower your car payment can help you free up some cash in your monthly budget to use for other expenses. However, keep in mind that a lower monthly payment in the short term has the potential to cost you more over time. Know your options and your payoff amount before agreeing to a new loan, particularly if your credit isn’t the best. We recommend comparing companies to find the best auto loan rates for your situation.
Our Recommendations for Refinance Auto Loans
If you’re looking to refinance your auto loan and reduce your car payment, consider working with refinance comparison websites. These allow you to get multiple prequalifications at once. Our top picks in this category are Auto Approve and myAutoloan.
Auto Approve: Top Choice for Refinancing
Auto Approve works with a network of lenders like credit unions, banks and dealerships to provide refinance loan offers. Borrowers with the best credit can get rates as low as 2.25%. Since Auto Approve specializes in refinancing, its customer service staff know how to handle any refinance situation. The company has many positive reviews on Trustpilot, where it has an average rating of 4.7 out of 5.0 stars.
MyAutoloan: Best Low-rate Option
With myAutoloan, potential borrowers can find offers for new and used car loans, refinance loans, private party loans and lease buyouts. Getting a better interest rate is key to lowering car loan payments, and if you have a decent credit score, it’s a good idea to check out myAutoloan. The company’s lender network can offer rates as low as 3.99% for new vehicle loans and 1.99% for auto refinance loans. The company has a 4.3-star average rating from Trustpilot reviewers.
How To Lower a Car Payment: FAQ
Our Methodology
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.
Here are the factors our ratings take into account:
- Reputation (30% of total score): Our research team considered ratings from industry experts and each lender’s years in business when giving this score.
- Availability (20% of total score): Companies that cover a variety of circumstances are more likely to meet borrowers’ needs.
- Loan Details (15% of total score): We considered the types of loans, term lengths and loan amounts that are available from each lender to determine this score.
- Rates (25% of total score): Auto loan providers with low APRs scored highest in this category. Available discounts were also taken into account.
- Customer Experience (10% of total score): This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness and helpfulness of each lender’s customer service team.
*Data accurate at time of publication.
"payment" - Google News
August 26, 2022 at 12:48AM
https://ift.tt/7QrB05l
How To Lower Your Car Payment in 2022 - MarketWatch
"payment" - Google News
https://ift.tt/l3n7PuI
https://ift.tt/Fb9mfRI
Bagikan Berita Ini
0 Response to "How To Lower Your Car Payment in 2022 - MarketWatch"
Post a Comment