A high car payment can be a drain on your budget. Fortunately, there are simple steps you can take to lower it. And if you haven’t taken out a loan yet, you can start off with a low monthly payment by shopping around and finding the right lender. 

4 ways to lower your current car payment 

Your car payment isn’t set in stone. It can change — you just need to speak with your lender or take extra steps to make it more manageable.  

1. Renegotiate your loan terms 

Lenders often allow you to defer a payment when you’re facing financial hardship. This can take the pressure off for a month or two, but it can lead to paying more overall. This is because interest continues to accrue during deferment.  

You can also request a modification of your loan. Your lender may be willing to extend your term — which means paying more interest — or reducing your interest rate. The latter is better financially, but it may be difficult to qualify if you don’t have good credit. 

2. Refinance your car loan 

There are two ways refinancing your car loan can help lower your monthly payment. You can get a lower interest rate with the same term remaining on your current loan, which means you pay less each month. 

Or you can refinance at a longer loan term. This will certainly make your monthly payments lower, but you’ll pay more interest overall. 

3. Sell or trade in your car 

If your car is over your budget, you can always sell it and move to a more affordable vehicle. The most convenient way will be to trade your car in at a dealership. You’ll be able to use that extra cash as a down payment on your next car and won’t need to handle a private sale. 

Private sales may net you more money. Just know that selling a car with a lien on it can be complicated. Talk to your lender to make sure you aren’t violating the terms of your contract. 

4. Make extra payments when possible 

Getting ahead on your car loan will help lower future monthly payments — or skip them entirely. While many lenders apply extra payments only to interest, you may be able to request yours go directly to the principal.  

This will help reduce the total amount you owe. It will also give you some much-needed wiggle room in the future. 

How to get a lower car payment before buying 

Shop smart to get a low payment on your next vehicle. You don’t have to take the first loan offered to you and keeping the amount you finance down is a great way to keep your monthly cost down, too. 

  • Buy a used vehicle. Not only is it significantly less expensive upfront, but buying a used car will also help you avoid the huge drop in value that new cars face.  
  • Make a large down payment if you can. The more you pay at the outset, the less you will need to finance — which means lower monthly payments. 
  • Trade in your current vehicle or sell it privately. Using your current ride as a boost to your down payment is a great way to keep your next monthly payment low. 
  • Improve your credit score before you apply for a loan. Lenders and dealerships will give you better rates when you have good or excellent credit. If you can, wait to buy a car until your score has jumped a few points. 
  • Shop around for the best financing. Don’t limit yourself to financing from the dealership. You increase your chance of getting a good interest rate and a flexible monthly payment by shopping around.  
  • Opt for a longer loan term, but keep in mind that this means more paid in interest. While you’ll be able to get your month-to-month costs down, you may pay thousands more than your car is worth with a loan term over 60 months. 
  • Pay sales tax up front. Lenders will let you finance the sales tax on your vehicle but try not to. You’ll end up paying interest on it as well — and it will just make your monthly payment bigger. 
  • Lease instead of buy. Leasing gets a bad rap, but you can save money on your monthly payments with a lease. However, it can be costly if you don’t have a good credit score — and you won’t be able to sell your car at the end of the lease period. 

The bottom line 

Because cars should take up less than 25 percent of your overall budget, it’s crucial to keep your monthly payment low. If you took out a loan at a high interest rate, refinancing or renegotiating are two of the best solutions. But switching to a more modest vehicle is also a solid option that can put more money in your pocket each month. 

If you’re on the hunt for a new or used car, carefully consider the overall cost and build up your down payment before you shop. You’ll pay less interest and start off with a low monthly payment.