The Best Way to Reduce My Monthly Car Payment

Financing is the most common way young couples buy a vehicle.

Financing is the most common way young couples buy a vehicle.

Your monthly car payment directly reflects the selling price of the vehicle and interest rate charged for your loan. Newly hitched couples often want to upgrade their vehicle, and most new couples are forced to rely on financing to purchase a vehicle. The best time to lower your monthly car payment is when you purchase the vehicle. You get more control over you payments this way. Existing auto loans do have refinance options to ease the sting of your monthly bill.

Increase Your Down Payment

The easiest way to reduce your monthly car payment is to put up a larger down payment on the car when you buy it. Save up enough to put money down. This reduces the total loan amount, thus the amount of interest paid over the life of the loan and your monthly car payment.

Extend the Length of the Loan

Your monthly payment depends upon the amount financed, the interest rate and the length of your loan. Shorter car loans result in a larger monthly payment. Extending your loan length over another year or two lowers your monthly payment. Be aware, however, that it increases the total amount you pay over the life of the loan in interest.

Shop Around

Fill out applications with more than one lender to view your options. When your potential lenders have competition, they are more likely to be competitive in their offers. This guarantees you get the lowest interest rate possible with the most favorable terms for your situation. Don't worry about excessive inquiries on your credit report. Credit reporting agencies treat multiple car loan applications within a 30-day period as one inquiry.

Refinance Your Car Loan

A refinance lets you change lenders, reduce your interest rate, extend the length of the loan and finance only the amount you still owe on the car. Your existing lender may be willing to refinance your loan to reduce your interest rate. Your other option is to shop around with other lenders to get the best terms your credit score allows.

 

About the Author

Leigh Thompson began writing in 2007 and specializes in creating content for websites. She has been published online in various capacities. Thompson has an associate degree in information technology from the University of Kansas and is working on a bachelor's degree in business and personal finance.

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