Ways to Make Your Car Payment More Affordable
The average monthly car payment for most people is $523, according to Experian, which is more than you want to pay for your new or used vehicle purchase. Here are ways you can make your monthly car
payment more affordable.
Know Your Budget
The first way you make your monthly car payment more affordable is by understanding your budget. Experts suggest that your monthly car payment — including interest and car insurance — be no more than 10 percent of your monthly income.
Calculate your monthly income, then use your average car insurance payment to determine what amount you can realistically put towards a car payment monthly. Your auto dealer will work with your budget to get you into a new or used car by showing you vehicles that fall within your price range or drawing up a longer loan term agreement that will not exceed your financial needs.
Have a Down Payment or Trade
The larger the down payment you can put towards your vehicle purchase, the lower your monthly payments can be. Aim for paying 20 percent of a car’s purchase price as a down payment; the larger the down payment you place on a vehicle, the lower your monthly payments will be.
If you don’t have a down payment but you have a car for trade-in, have your vehicle detailed and serviced so the automobile is in its best condition when you present the trade-in to your auto dealer.
The better condition your car is in, the more money you can get for its trade-in value. Get a quote for the car’s value before you negotiate sticker prices for a new vehicle purchase so you don’t inadvertently shop for cars outside your budget.
Choose a Longer Loan Agreement
You can have an auto loan agreement be for upwards of five years, although used car payment plans tend to be shorter. The longer your loan agreement on your vehicle, the smaller your monthly payments are. Just make sure your interest rate is competitive so most of your payment goes towards principal and not interest.
Check Your Credit Score
Your credit score will determine how much your auto loan will be in the first place. Your credit score will also determine the interest rate you pay towards your new or used auto loan. The better your credit, the lower your interest rate will be, which will make your monthly auto payments cheaper.
To buy a used car, you need a credit score of around 655 or greater. For a new car, your credit score needs to be 715 or greater. Your credit score requirements will vary depending on how much financing you need for your auto loan, how much your down payment is, and other factors.
If your credit score is under 655, you can still get an auto loan, but you should work on improving your credit before going to your auto dealer. You can improve your credit score by doing the following:
- Making credit card payments on time
- Lowering debt-to-income ratios
- Paying off older debts
- Increasing monthly credit card payment amounts
Your auto loan lender will go over your credit score to determine what type of auto loan will work best for your circumstances. Your lender will also show you different loan term lengths so you can see what a three-year, five-year, or longer payment term will cost you on a monthly basis
Your auto dealer wants to help you get into the right vehicle for both your needs and your financial situation. Be upfront about your budget and allow your auto dealer to show you vehicles that fit within your price range.
We have a large selection of both new and used automobiles at Roseville Automall, so visit us today to shop for your next vehicle. Our helpful representatives will get you into an affordable, reliable vehicle today.