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How to Lower Your Car Payment

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If you’re feeling a financial pinch, a lower car payment could lift a lot of weight off your shoulders. The average monthly car payment in the U.S. is $569 for new vehicles, $397 for used and $466 for leased. Whether you’re struggling to make your car payment for a month or two — or you need it lowered permanently — you have options.

Here are five strategies to try if you’re wondering how to lower car payments. We’ll explain who might be the best fit for each option, and how to get it done. Then, we’ll discuss ways you can make your car work for you.

  1. Talk to the lender
  2. Refinance
  3. Sell the car yourself (and buy a cheaper car)
  4. Sell it or trade it in to a dealership.
  5. Lease a car

5 ways to lower your car payment

1. Talk to the lender

Best for: You’re having trouble making payments temporarily, and you need to miss a payment or have lower payments for a couple months.

How to do it: Call the lender and talk to a representative about a solution that works for you and them. The lender may be willing to work with you to lower your car payment without refinancing. Keep in mind that even if you defer payments or negotiate a lower monthly payment, the loan balance will most likely stay the same and you’ll still owe interest on it. Still, it’s better than racking up late fees or damaging your credit.

2. Refinance

Best for: You’re having a long-term problem paying your auto loan. You could get a longer loan term, a lower interest rate — or both, depending on your situation. But beware: The longer the loan, the more interest you’ll pay in the long run.

How to do it: Apply for a refinance auto loan from multiple lenders. It doesn’t hurt your credit to apply to several lenders any more than it hurts to apply to one, as long as you do all applications within a two-week window.

3. Sell the car yourself (and buy a cheaper car)

Best for: You’re having a long-term problem paying, and refinancing is expensive or not an option.

How to do it: You can almost always get more money for your car by selling it yourself, rather than trading it in to a dealership. Here are a few ways you can boost its sale price:

  • Clean out and wash your car.
  • Take photos in good lighting.
  • Call the lender or log into your online auto loan account to get the payoff amount, which is how much you’d need to pay off the car in total. List the car at a price a bit over that so you can decrease it in negotiations and still cover what you owe.
  • Post your car for sale on one or more peer-to-peer sites — e.g. Craigslist, eBay, Oodle, Facebook Marketplace, local newspaper classifieds and others.

Once you find a buyer, follow through with your state’s laws to officially sell it — here’s more on how to sell a car when you still have a loan. Then get a cheaper car for yourself, if you still need one. You could use the same peer-to-peer sites to find a car or go to a dealership. First, figure out how much you can actually afford.

4. Sell it or trade it in to a dealership

Best for: You don’t want to sell the car yourself, refinancing isn’t an option and you need lower payments for the long term.

How to do it: Some dealers, but not all, will buy your car without you buying one of theirs. However, almost all dealers accept trade-ins in exchange for a new car, so find the right dealer according to your purpose.

There are two numbers you should look up before you go:

  1. How much you owe. Again, call the lender to get the payoff amount, which is how much you still owe the lender. You’ll want to sell or trade in the car for at least that much, so you won’t have to make any more payments.
  2. How much it’s worth. Look up the trade-in value of the car on an industry guide, like Kelley Blue Book or NADAguides. You shouldn’t sell the car for less than what it’s worth, and the goal should be to sell it for more than enough to cover what you owe.

Here are more tips on how to trade in your car.

5. Lease a car

Best for: You’ve sold your car to a private seller or dealer and still need a vehicle. You’re hesitant to get locked into another auto loan.

How to do it: A major advantage of leasing is the low payments they require. There are a few types of leases you may be able to get:

  • New car lease. This is the most common type of lease. You can only get a new car lease from a dealership, and you may need good to great credit to be approved.
  • Used lease. These may not be available everywhere, but they are out there. A used car lease could mean even lower payments than a new one; there may also be less strict credit requirements and no need for a down payment.
  • Lease takeover. This is when you take over a lease from another person who wants to get out of their car lease. The advantages here could include less strict credit requirements, no down payment or incentives from the person who’s trying to offload the car.

Read more if you’re debating whether to lease or buy.

Want to keep your car but need help affording it? Use your car to make money.

These solutions won’t lower your payment; instead, they increase your income so you can more easily make your payments. Depending on your situation, using the car to help pay for itself could make sense. If you’re lucky, you might be able to make more than enough to cover the car payment, so some extra cash goes in your pocket.

Each of these three options come with risks — make sure you consider them carefully and have the right insurance.

Sign up for ride sharing

Enlist with a ride service like Lyft or Uber and taxi people around as a part-time job. Once you pay the car off or your finances aren’t as tight, you don’t have to continue as a driver and you can keep the car.

Rent out your car

Instead of driving passengers around yourself, allow people to rent your car when you’re not using it. This way you’re not actually working to earn money — in a way, you’re getting the car to earn money itself. Two of the biggest companies you could do this through are HyreCar and Turo.

Make deliveries

Amazon, the U.S. Postal Service, restaurants and food delivery services all hire drivers. You may be able to make a wage, plus tips, to help cover your car expenses and make ends meet. You can read more about side hustles to make extra cash here.

 

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