4 Ways to Lower Your Monthly Car Payment

October 15, 2013

Many people are constantly looking to lower their monthly car payment. One big problem with auto loans and cars in general, is that sometimes people may be financially secure at one time, but down the road, they aren't. When you first bought or leased your car, you may have been in good economic times with a good market. All it took was a day or two of a bad stock market and you could be looking to tighten your belt. One of the first things that people go to in this case is to lower their car payments. Here are some ways to lower or get cheap car payments.

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1. Refinance Your Loan

This is likely the most popular, and most used option. Refinancing is where you change lenders for your loan. This is usually because you can get a better interest rate at the second lender. It is common because the interest rates may have lowered since the time when you bought your car. In the past few years, you may have increased your credit score, which could have been the reason for a higher interest rate. Whatever the case may be, refinancing allows you to get a better rate when all is said and done. The costs are very low, usually just a small transfer fee, as well as a possible re-registration fee of your car, but that's about it. It is pretty simple to do, and can be done in the matter of a day or two. In the long run though, the possible $100 it costs to refinance is worth the potential thousands it could save, depending on the size of your loan.

2. Leasing

Leasing allows you to "rent" a car for an extended period of time. Lease offers typically are known for having lower monthly payments than when you buy a car. The reasoning is obvious, as with a lease you are paying about 50% of the total price of the car. For example, a $40,000 car likely will make you pay $20,000 to lease it over the course of your terms. If you bought the car, over a slightly longer time, you would have to pay the other 50% as well, and this leads to lower payments. However, with leasing, you then end up with no equity or car at the end of the lease agreement.

3. Mileage Limits

If you already have a lease, you can lower your payments by changing your agreement. Leases come with mileage allowances, meaning you can go a certain amount of miles per year. If you go over, you will then have to pay mileage penalties, which are usually a set charge per mile, which can get costly. You can change your agreement by lowering the amount of miles you are allowed, and this will lower your monthly payment some.

4. Buying

You can also buy a car, but still have a lower monthly payment. You must then expand the amount of years you will pay it off in. You will see lower monthly payments, but in the end, you will pay more due to you paying more in interest.

Related Questions and Answers

Can You Take Depreciation Expense on Car Payment Plans?

If the car is primarily used for business, you can deduct depreciation expenses on car payment plans. The vehicle must be used for business or owned by a small business for the deduction to be valid. Your personal car would not qualify for this type of deduction. It is often best to consult with a tax lawyer or your accountant at tax time to determine exactly what you can deduct. The rules for state taxes will vary by state, so be sure to check with your state tax body in regards to deducting your depreciation and interest expenses.

Can you Make a GMAC Car Payment Online?

Yes, you can can a GMAC car payment online. GMAC makes it easy to follow your loan online. Their website allows you to get up to the minute information on your vehicle loan as well as make online payments. You must sign up for online access, but the process is pretty simple. You can than view your latest statements, make online payments and even set up automatic payments. GMAC is in the process of becoming Ally, which means sometime in the near future you will need to go the Ally website to view your loan details.

Is there a Specific Way to Calculate a Car Lease Payment?

It is possible to calculate a car lease payment. In order to do this you will need some information. You will need the price of the car, the money factor, the lease term and the residual value of the vehicle. In order to get residual value and the money factor numbers, you will have to contact the dealer. First, multiply the residual value number by the price of the car. This will tell you how much of the car's value you will use. Residual value numbers are normally in the 55-57% range on a three year lease. Subtract the number you get from the price of the vehicle. Divide this number by 36 or the number of lease payments you plan on making. This is the payment amount without interest. Keep this number handy. Calculate the interest you will be paying by adding the price of the car to the residual value, and then multiply by the money factor. The number you get is the interest you will pay. Add this to your payment number, and that is the total payment.

What Happens if You Skipped a Used Car Monthly Payment?

Skipping a used car monthly payment is never a good idea. The penalties will vary depending on the loan agreement and the bank or finance company that wrote the loan. At the very least, you will incur late fees and will need to make a double payment plus late fees the following month. Not making loan payments on time can affect your credit rating as well. If the bank or finance company reports your late payment to a credit reporting agency, it will lower your credit score. There are some banks and finance companies that periodically allow you to miss a payment without a penalty. Check your loan documentation for details.

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