Photo by Focal Garden
If you’re looking for ways on how to save money on car payments, you’re not alone. Each year, millions of people pay several thousands of dollars toward their debt on their car, which not only means less money saved and more monthly income needed, but also doesn’t really gain you very much, since cars are considered to be depreciating assets. (You’re not going to be able to sell your car for more money in five to ten years like you would a house – you’ll be lucky to sell it for scrap metal) If you want to reduce your monthly car payment, here are some tips to lower your car payment.
The first mistake most of us make is getting that car payment in the first place. Auto dealers and car dealerships make it all too easy with their instant financing and everything else. I remember the first car I bought. I paid good hard cold cash, $800 for a 1989 Pontiac Sunbird. I was sixteen years old, working a lousy cashier job at a now bankrupt retail store. But, that car symbolized so much more – that was freedom!
Well, being that I bought an $800 car that was quite old with quite a lot of problems, eventually it died and it was at the point where it would cost more money to fix it than I paid for it! So, it was time to start looking at other alternatives. And that is how I got stuck in that trap of having a car payment.
From now on, I want you to make a promise to yourself to never get another car payment. Whether you lease a car or get a loan, that is several hundred dollars every month you are dedicating to your car, not to mention thousands of dollars you are wasting on interest.
If you’re buying a car and I can’t convince you to avoid a loan at all costs, here are some things to do:
Buy a Used Car: Slightly used cars, ones that only have 20,000 miles on them and are still under the manufacturer warranty, typically are several thousands of dollars less, but still pretty close to new. With the manufacturer warranty, if the car does need repairs, they’ll likely be covered. My $800 first car was very used, but it still did it’s purpose of getting me from Point A to Point B – and I wasn’t spending hundreds of dollars a month. Yes, it needed fixed quite often, but spending a few hundred hear or there every 6 months was a lot better than spending that every month.
Put up the largest down payment as possible: The larger your down payment, the less money you will be borrowing, and this means a lower car payment as well as less interest you will be paying. Say the car you want costs $9000. If you put down $3000 in cash, your car payment will be much, much less.
Choose the Shortest Borrowing Time Available: The shorter your borrowing time of course will likely mean a higher payment – but you’ll be saving quite a bit more on interest and more money in the long run.
Shop Around for a Loan: You don’t have to use the car dealership’s recommended finance agancy to get a loan. Check with multiple banks to shop for the best interest rate. If you are worried about many people checking your credit, you can always order your own credit report and then give it to anyone you are looking to get a quote from.
Speaking of Credit: The better your credit, the better interest rates you will usually be able to get. So keep your credit in top shape, and make sure you know how it is before you apply for a loan. If your credit is bad, then you will likely want to wait anywhere from 6 months to a year.
Do You Even Need a Car? Everybody thinks they need a car, and I will agree it can be useful to have one. But if your family already has one car, could you get rid of a second one? Could you survive by taking a bus or riding a bike? One of the many perks of living in the city as opposed to the suburbs is that a car is just not necessary. At my first apartment I could walk to the grocery store, bank, and post office! If you already have a car, would it make more sense to spend the money to fix it and get a few more years out of it while you save up for a new car? In hindsight, this is what I should have done as a teenager with my first car – but I didn’t know any better.
What about for those of you who already have a car payment and you want to save money?
Well, the only advice I can give to you is pay off more than the minimum payment each and every month. If your car payment is $200 and you pay $300, it’s going to save you quite a bit later down the road. The sooner you pay it off, the less interest you will have, and you won’t have to be worried about always having that extra money available each month to make that monthly payment – and instead could even put that money in a fund for when you decide to buy your next car!
You can save money on your car payment, but it’s not always easy. If you follow these tips, you’ll be able to pay off that loan in no time, and then make the vow to yourself to never get in a loan or lease again!
