How Can You Reduce Your Car Loan Monthly Payment?
For many drivers, a lower monthly car payment is a dream. After all, a new vehicle can be an expense that can throw off any budget, so lower monthly payments are the best way to afford a new vehicle without throwing off your monthly budget. Fortunately, several strategies can help you reduce your monthly payment costs.
Save for a Larger Down Payment
In general, it's a better financial decision to start your auto loan with a down payment. While there are zero-down auto loans available, the trade-off for a zero-down payment deal is negative equity and higher monthly payments, as well as a higher interest rate and more total interest on the vehicle for the life of the loan.
To enjoy lower monthly car payments overall, it's ideal to save at least 10% of the cost of the car for the down payment. For a $30,000 vehicle, a 10% down payment is $3,000. If you aren't sure how much to save, you can always try a down payment calculator.
Take Advantage of Your Trade-In Value
One of the best ways to reduce the sticker price for new car purchases is to take advantage of the trade-in value of your old vehicle. Although cars depreciate almost as soon as you purchase them, you can still use the value of your current car to offset your new vehicle's price. The trade-in price of the car will be determined by the current market value of the car, the number of miles on the car, and the overall condition of the car.
When you use the trade-in amount to reduce your loan amount, the value of your trade-in vehicle is applied to the principal cost of your auto loan. Some drivers may even use trade-in value in place of a down payment to lower the new car price.
Improve Your Credit Score
While there is no minimum credit score required to apply for car loans, it's still a good idea to improve your credit score. A good credit score typically means that the monthly interest rate on your vehicle loan will be substantially lower since car loan lenders will be more confident that you can repay the car loan.
That said, people with low credit scores can still qualify for auto loans. In fact, many dealerships have loans designed specifically for buyers who have a poor credit history, such as people who are recovering from bankruptcy. The only downside of an auto loan for poor credit is the higher interest rates.
Refinance or Modify Your Loan Terms
You can also reduce your monthly vehicle cost by refinancing or modifying your loan terms. This is a particularly good strategy if your financial situation has changed or you want to take advantage of lower national interest rates. Refinancing your loan or extending your loan term for a better interest rate usually means a more affordable monthly car payment.
Many drivers will consider refinancing their current loan if they have recently improved their credit score and believe they can qualify for better loan terms.
Explore Cash Rebate Deals
Exploring the cash rebates offered by your local dealership is another good strategy to reduce car loans. A cash rebate is a cash return from car manufacturers in exchange for purchasing a new car or signing a new auto loan. A cash rebate is typically offered by manufacturers to improve reduced sales for certain car models.
Make Extra Car Loan Payments
If you can swing it, it can also be a good strategy to make an extra car loan payment occasionally since this will help you pay down the principal cost of your new car. Adding additional cash to your monthly payments can reduce the interest charged on your loan and help you pay off a new car much more quickly.
And don't worry - occasionally paying more on your monthly car loan does not mean your loan amount will increase every month, so this is a safe strategy to employ.
Consider Buying a Used Car
Finally, you can greatly improve the results of your estimated car payment calculator by selecting a car with a lower price. Used cars tend to have a lower car price than new cars, which can make the total loan amount much more affordable. Many drivers will even be able to find used cars at car dealers from the previous model year since some people like to immediately upgrade to the newest model.
How Else Can Your Local Dealership Help With Financing?
Aside from helping you get a good trade-in value for your old car, your local dealership can also help with financing in other ways. The finance department at your local dealership can do the majority of the legwork for finding you a good auto loan, so you can borrow money for your loan without going over your monthly budget.
Other Ways Dealerships Help You Save
Additionally, you can go back to your local dealership for regular service to reduce the cost of car maintenance. The service center at the dealership is staffed with experts who can service your car based on the recommended service schedule outlined by your manufacturer, which can save you money on unnecessary repairs from third-party mechanics.
Keeping up with your service schedule for oil changes and the like can even help you preserve the value of your car. Doing your best to preserve your car value can help you get a better trade-in valuation if you plan to buy another car in the future.
A car payment calculator is an excellent tool to estimate your monthly car payment. A calculator can be used to give a ballpark figure for your interest rate and the total cost of your loan when loan terms are factored in. Reach out to Landmark Dodge Chrysler Jeep Ram at 816-836-0100 to learn more about estimating monthly vehicle costs for auto loans today.