This is the average car loan payment. Here’s how you can pay less
These tricks could save you a lot of money.
- New data reveals that the average monthly car payment is $433 according to a recent survey.
- You could get away with spending even less if you’re shopping for a car.
Depending on where you live, a car may not be a luxury, but rather a necessity. It can also be a significant expense. Between auto insurance, maintenance, and gas, you could be spending a lot of money owning a vehicle. This is especially true if you end up having to finance a car.
Now, if you follow this path, you are not alone. According to a new doxoINSIGHTS report, 73% of US households have a car payment. Meanwhile, the average monthly car payment is $433, which is no small amount.
If you need a car and can’t afford one, you may have no choice but to take out a car loan. But here are some steps you can take to make that loan cheaper.
1. Boost your credit score
Your credit score says a lot about you as a borrower. The higher this number, the cheaper it becomes to take out a loan. This is because when your credit score is high it signals to lenders that you are not a very risky borrower – and therefore you are likely to be rewarded for this in the form of a lower interest rate on a car loan.
If your credit score could use some work, it’s best to raise it before you apply for car financing. One of the best ways to boost your credit score is to pay all bills on time, which will improve your payment history. Lowering credit card balances could also help boost your score, although that’s not possible, especially if you’re saving money for a down payment on a car.
Another potentially easy way to boost your credit score? Check your credit report for errors. Correcting mistakes could leave you with a higher score quickly.
2. Don’t buy a new car
Many drivers are incentivized to buy new cars with cool features. But unlike other assets that tend to increase in value over time, cars tend to lose value over time. And buying a new one could mean ending up with a higher monthly automatic payment than you can comfortably afford.
Rather than go this route, explore your options for a Certified Pre-Owned vehicle. You may find that you are able to buy a perfectly comfortable car for a much lower price.
3. Refinance an existing loan if it has a high interest rate
Maybe you took out your car loan when your credit wasn’t so good. If so, and you’re now saddled with a higher interest rate on your loan, it’s worth considering refinancing. This basically means swapping your existing loan for a new one with more favorable terms. If your credit score has improved significantly since signing that original loan, you could save a lot of money.
Can you afford a monthly car payment of $433? Whether or not that amount fits your budget, it pays to explore different ways to spend less. That way you’ll free up money for other things, like gas costs, which have been skyrocketing for weeks.