That’s the current average cost for a new vehicle, per Kelley Blue Book. It ranks as the second-highest average ever recorded — only matched by the December 2021 figure.
Monthly car payments are following suit, with the typical payment hitting a record high of $730, according to Cox Automotive and Moody’s Analytics.
With the ongoing semiconductor shortage still hampering production, car prices don’t seem likely to dip anytime soon.
For many vehicle owners, that means getting the most value from what they already own. One approach is to reduce your current car payment until the auto market becomes more affordable.
7 Ways to Lower Your Car Payment
1. Refinance
This is probably the most straightforward choice, and it’s sensible if you want to shrink your monthly payment over a longer horizon.
You may also be able to secure a lower interest rate. Rates may have changed since you financed your vehicle, but your credit score could have improved too.
Looking into refinancing options can pay off. Just remember that extending the loan term typically means paying more interest across the life of the loan.
2. Renegotiate Your Car Loan
If you’re facing a short-term squeeze, your lender might let you postpone a payment or two. For longer-term relief, consider asking your lender to restructure the auto loan.
They could agree to lengthen the term or lower your rate, which is more likely if your credit profile is strong.
Keep in mind: Extending the term will usually increase the total interest you pay overall.
3. Sell the Car
Given today’s buoyant used-car market, selling your vehicle and buying something cheaper could be a smart move. Or perhaps you can manage with just one car now that remote work is more widespread.
Choosing a less expensive car can cut your monthly payment — or eliminate it — freeing up cash for other priorities, such as saving toward a future vehicle.
4. Trade in the Car
Dealerships are hungry for inventory and may pay a premium for your used vehicle. Bring it in and see what they’ll offer, keeping in mind you’ll probably want a replacement with a lower monthly payment.
Before visiting a dealer, know how much you still owe — you’ll want at least that amount from the trade-in — and be aware of the car’s market value. Kelley Blue Book provides reliable trade-in estimates at Kelley Blue Book.
5. Make Extra Payments
Applying an extra payment when possible helps you retire the loan sooner and reduces the total interest paid. It also can lower your monthly obligation over time and might let you skip some future payments.
One approach is to use an annual tax refund to make a lump-sum payment on the auto loan.
6. Make a Larger Down Payment
This won’t help if you already have a loan, but it’s worth considering for any future vehicle purchase.
Just like a mortgage, putting more money down up front lowers your payments for the duration of the auto loan.
For instance, a $5,000 down payment on a $25,000 car with 7% sales tax and a 4.5% APR results in a $405 monthly payment on a $20,000 loan.
With no down payment under the same conditions, the monthly payment would be $499.
7. Rent Out Your Car
You can rent your vehicle to others, which can be particularly effective if you live in a larger city with visitors. Stay put for a weekend and let tourists rent your car — earning money while saving on parking or other travel costs. You could also rent your car out when you travel instead of paying for long-term airport parking.
On the car-sharing platform Turo, a 2020 Nissan Altima rents for about $60 per day, while a 2016 BMW 4-Series goes for roughly $95 per day. The marketplace features everything from economical Toyotas to outdoorsy Subarus and Jeeps, as well as luxury offerings like Porsches or Lamborghinis.
Alex Carter is a senior writer for Savinly.
