For whatever reason, at some point during car ownership you may need lower car payments. Whether it’s because you have more expenses or took a reduction in income, a more affordable installment may be the only way you can have a car without adding a lot of stress to your financial situation or damaging your credit. The question when you run into this problem often is, how do you deal with it?
Your Options for Getting a Lower Monthly Payment
There are only really three options for lowering your car payment. Not all of them will work. They are:
- Refinance at a lower interest rate – If you’ve seen an improvement in your credit, or rates have gone down, you may be able to refinance your current loan to get a lower payment. However, if you are still working on your credit or rates are still the same or higher, you’ll have to take other avenues.
- Extend the term of your loan – Extending the term of your loan can lower monthly payments. The one risk you have is an upside down loan. If you don’t have enough equity to extend the loan, either you or the lender may not want to take the risk. An upside down loan is when the car is worth less than what it’s financed for.
- Trade in or sell your current car – The best option for people who are hindered by credit or don’t have enough equity in their loan is to trade their current car in – or sell it – and get something more affordable.
Will Trading in Your Current Car Lower Your Monthly Payment?
There are a few things you need to consider before running to the nearest dealership and trading in your car. You’ll want to take a few steps to ensure you get the best amount of money and that it doesn’t leave you with a balance due. The steps are:
Contact the creditor – The first step in trading in your car is to find out how much you still owe. The payoff value will factor into down payment and making sure the trade in is worth it.
Assess the value – Before you go running off to the dealership to trade in your car, you’ll want to research. Use sites like Kelley Blue Book, Edmunds.com and Craigslist to assess the value of your car. KBB and Edmunds will help you identify trade in value through overall condition, the mileage and trims and options. Craigslist will give you some insight as to what dealers and private owners sell your vehicle for. It may help you with negotiations.
Check with several dealerships to see where you can get the best trade in value – Just like you would a loan or car, you’ll want to shop around and find out what type of deals you can get for your trade in. Do a comparison to get the maximum value.
Talk to your creditor about new loan terms – You can either stick with your current creditor or shop for a new loan. Again, find the best deal so you can maximize your savings and lower your monthly payment as much as possible.
Finding Your Next Car
If the goal for your next vehicle is finding something more affordable, don’t just look at the car itself. Look at the gas efficiency, repair and maintenance costs, and the cost of insurance. Certain vehicles cost a lot more to fix, while others have poor MPG. Try and look at every aspect so you can reduce your bills all the way around.
A great way to shop for used cars is to look at what you are using it for. Is it a family vehicle? Do you need to haul? Are you just commuting? From there, look at which vehicles fit those parameters best, and then look at reviews, reputation and value.
Trading in your car for a new one can be a great way to lower your monthly payments. However, you’ll want to do a little legwork first to make sure you are able to reduce that payment as much as possible.
