Before you get into options for a lower car payment, it's important to understand it's so high in the first place. Here is what may have happened.
You couldn't contain your excitement to buy a new car, and you probably asked around, did a bit of research, and contacted some car dealerships to see if they had the vehicle you were looking for. The problem with this entire scenario is that you did not shop enough for a car loan.
Before you sign the paperwork at a car dealership, you must understand that not everyone has your best interest in mind when it comes to arranging a loan. Since you're stuck with a bad deal now, it's only natural for you to think, “How can I lower my car payment?”
Well, one of the most reasonable options at this point is to consider refinancing your vehicle. Here are your options.
Look For a Lower Interest Rate
The best thing about car refinancing is that you get to decide everything all over again. You're no longer stuck in an infinite loop of high monthly payments. In this way, your new deal could very well be a game-changer.
Even if you're able to secure a slightly lower interest rate and you think that you won't get a better deal elsewhere, you can still save more over the course of your new loan. For example, if there is a 2.4% decrease in the interest rate, your car payment can go down by up to $30 per month.
Extend Your Term
The next best option is to increase the term of loan payment. A longer-term means paying less per month, and a shorter-term means paying more per month. However, paying less for a long time will add up to be a higher amount than paying more for a short time.
In the end, the car loan market is huge, and all kinds of investors and lenders are involved in it. Hence, there is a lot of variety in terms of car loans available to you. There's no reason for you not to shop around and bargain your way into the best one you can get.
For example, let's say your principal loan balance is $25,000, and you have 50 months left on your loan at a 5% interest rate. Even if you can extend it to 10 more months by car refinancing at the same interest rate, you could save up to $80 per month.
In the end, even if you end up spending more over the life of your loan, it can work out well for your other budgetary priorities.