AMERICANS could be feeling some financial pressure as costs rise – with car payments making up a big chunk of monthly expenses for many.
In the second quarter of 2020, the average monthly payment for a used car was $397, compared to $568 for a new vehicle, according to credit agency Experian.
With inflation continuing to soar, this could be a difficult payment for many Americans to manage.
We explain a few ways to reduce or even eliminate your car payments.
Contact the lender
The first thing you might want to try is contacting your lender if you’re having trouble making your payments.
This was not uncommon at the start of the coronavirus pandemic, as many auto lenders rolled out relief programs to help struggling Americans.
It doesn’t hurt to contact your lender and see if they’re willing to cut your payments for a few months or defer them.
Refinancing might be the best option if you’re looking to lower your car payments.
As part of refinancing, you may be able to lower your interest rate if you have made all your payments on time.
If not, you may be able to reduce it by increasing the term of the loan.
For example, on a car that costs $30,000 with an interest rate of 3.11% for a term of 60 months, your monthly payment is $541, according to a Google calculator.
However, if you extend the term of your loan an additional 12 months, then your monthly payment would be reduced to $457.
This would save you more than almost $100 per month.
Sell your car
The third way may seem a bit complicated if you have an existing loan, but it is even possible to make money if you have positive equity.
Positive equity means the market value of a car exceeds the amount owed on the loan.
If you have positive equity in your vehicle and find a buyer, you will want to contact your lender and discuss the sale with them.
Some may ask you to send them the buyer’s information and they’ll take care of the rest – but this may depend on the lender, so you’ll want to check with them.
Once the process is complete and it is determined that you have positive equity, you will not only eliminate your car loan, but you will also earn money.
If you still need a vehicle, you can try leasing or financing a less expensive car.
If you’re curious about the current value of your car, you can use Edmunds’ Valuation Tool.
You will need to enter information such as year, make, model, vehicle identification number and license plate.
Trade in your car for
Again, having positive equity will benefit you when you trade in your car with a dealership.
For example, suppose you have positive equity of $2,000 when you trade in your car for another.
You can then use it for a down payment, which means your monthly payments on your chosen car will be lower.
Once you’ve chosen a car, review your options with a dealer and see what’s best for you, whether it’s leasing or financing a cheaper car.
According to a report by Experian, consumers save an average of $113 on monthly leasing payments compared to buying a vehicle with an auto loan.
For those looking to cut costs, we show you five ways to save on prescription drugs and five ways to lower your grocery bill.
Plus, we show you how you can lower your cable bill by up to $178.
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