How to Keep Up with Your Car Loan Payments
Many Americans rely on car loans to be able to drive. Car loans have been on an upward trend for the past several years. The number of car loans has grown about 29% over the past decade to about 116.43 million loans. With higher interest rates, and the average costing almost $50,000, many drivers are paying more than $1,000 a month on car loan payments. That’s a lot of monthly income going towards one loan. Here’s how you can manage your car loan payment and save money.
How to Save on Car Loan Payments
Understanding Finance Options
To get the best car loan and pay the least for your new car, it’s important to shop around for car financing options. Research the different types of loans available to you, the terms, and rates before you choose one. Before you start shopping for cars at the dealership, get pre-qualified. You could save money by taking out a loan from a bank or credit union rather than from the dealer.
Put Off Buying
Car prices have skyrocketed the past few years due to supply chain issues, pent-up demand due to the pandemic, a shortage of microchips, and Federal Reserve rate hikes. With fewer cars to sell, dealerships can charge more for cars they do have in stock. If you can keep your existing car for longer, you could benefit by waiting.
Pay Off Your Car Faster
Paying down your principal car loan balance faster can help you get out of debt faster and reduce what you spend on your car. If your loan terms allow for prepayment, making lump-sum payments when possible will help you pay down your loan in less time.
Sell Your Used Vehicle
Used vehicles have been selling for more due to supply chain issues. While prices for used cars have dropped recently from the spike they saw the past couple of years, you could still get more for your used car right now and put that money towards a new car. People typically get a higher price when they sell to a private buyer, but car dealers make it easy to trade your car in.
How to Manage Higher Car Loan Payments
While the cost to purchase or lease a new car is on the rise, your income might not be. Inflation has also made it challenging for many Americans to keep up with bills and expenses. Budgeting is more important than ever. If you need to purchase a new car, you may need to readjust your budget and cut discretionary spending to keep up with your car loan payments and not fall behind.
Car prices are increasing as are interest rates. Car loans are costing Americans upwards of $1,000 per month, making keeping up with car loan payments challenging. If you can put off buying a new car, you might benefit by waiting. If you do decide to buy a new car now, make sure to shop around and understand your car financing options. If you own your vehicle, selling it can help you put down a larger down payment and reduce your monthly car payment.
If you purchase a new car and increase your car payment, make sure to review your spending habits and adjust your budget to keep up with your bills.
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