There are lots of car finance options out there, and knowing which one is best is hard. If your car payments have become unaffordable there are a few things you can do to lower your monthly payment. A job loss, fewer hours at work or an unexpected expense can suddenly make your car payment a budget buster. Below are some of the most common car finance options, followed by tips on how to lower your payment:
Dealership – The majority of car dealerships offer financing to their customers. This is convenient, letting you get all of the paperwork done in one place as well as knowing which vehicles you qualify for. The financing department of a dealership is open whenever the dealership is so you don’t have to work around a banks hours. Most dealerships will charge a higher interest rate than a bank. There will often be fees involved as well. Read the entire finance agreement and ask questions about anything you don’t understand.
Bank Or Credit Union – Getting pre-approved by a bank or credit union is a good idea. Even if you don’t use the bank loan it can be used as a bargaining tool at the dealership. Dealers make a lot of money on car loans and will be willing to negotiate on interest rates if you have another option.
Lease – Leasing a car can be a good idea under certain circumstances. If you like to get a new car every few years and don’t put too many miles on a vehicle per year a lease often makes sense. Read all the details of the lease, pay attention to mileage allowances and charges for going over.
Cash – If you can afford it, cash is a great way to purchase a car. You don’t have to worry about interest rates or jumping through hoops to get a loan. The downside is that you need a lot of cash if the car is a new vehicle.
Lower Your Payments – Here are a few quick tips on how to lower your car payments if they have become too expensive.
Refinance – If your original loan carries a high interest rate, see if you can refinance to a lower rate. Contact your current lender as well as other financial institutions and try for a better rate.
Lengthen the Term – Ask your lender to lengthen the term of your loan. Explain your situation and see if it is possible to lower your payment by adding to the term.
Trade Down – While this is probably the option of last resort it may be necessary to trade down to a cheaper car.