How To Lower Monthly Car Payments in 8 Ways (2024) (2024)

All APR figures last updated on 3/16/2024 – please check partner site for latest details. Rate may vary based on credit score, credit history and loan term.

Another good option for lowering your car payment is to refinance your loan. A refinance auto loan replaces your original loan with a new one. In the ideal scenario, you’d get a lower interest rate, which could lower your car payment and save you money on total interest.

Source: Capital One

However, if your rate is about the same or worse, you’ll have to extend your loan term to lower your monthly car payment. This means you’d take longer to pay off your remaining principal, and that would increase the total interest you’d pay. We don’t recommend doing this because you could become upside down on the loan, which is owing more on your car than it’s worth.

To get the best monthly payments for auto loans, we recommend comparing a handful of prequalifications when you shop for a new or used auto loan. The lower your auto loan interest rate is, the smaller the payments will be.

You can also complete multiple auto loan applications within a certain time frame and the hard inquiries will be combined into one on your credit report. This time period is 45 days for FICO® credit scoring models and 14 days for Vantage models.

What Are Current Auto Loan APRs?

Auto loan APRs vary depending on your credit history, but they also vary a bit depending on the lender you work with. According to Experian’s State of the Automotive Finance Market report, the average annual car loan interest rate in the first quarter of 2023 was 6.58% for a new car loan and 11.17% for a used car loan. The APR combines the interest rate with any fees annualized over the loan term, and it represents the total cost of borrowing the money.

Here are the average car loan APRs by credit score for new and used cars according to Experian’s report:

It’s exciting to dream about the latest features and finishes, but if you want a low monthly car payment, we recommend borrowing as little money as possible. In other words, pick an affordable car.

Maybe you can get by with a used Jeep Wrangler Sport instead of a new four-door Rubicon, for example. A well-maintained and reliable used car is the smartest choice for lowering your car payment on your next vehicle.

Another important component in your monthly cost is your down payment. The more money you put down, the less you’ll have to finance. Let’s say you put 10% down on a $10,000 loan at a 4% APR for 60 months. You’d finance $9,000, and your monthly payment would be $165.75.

If you put 20% down, you’d finance $8,000, and your monthly payment would be $147.33. You’d also save more than $100 in interest. The short-term pain of putting more money down rewards you with a long-term gain of lower monthly car payments and less total interest.

There’s one other option to consider when figuring out how to lower your car payment with a new loan. If you choose a longer loan term, you’ll pay less per month, all else being equal. So a 60-month term has smaller payments than a 48-month term, while a 72-month car loan has even smaller payments than a 60-month term.

But longer terms will always cost more in total unless you can get a lower rate or make a bigger down payment. Financing $10,000 at 4% APR over 48 months will cost you $837.95 in interest. However, financing the same $10,000 at 4% APR over 72 months will cost you $1,264.53 in interest. The issue is compounded when you finance larger sums of money or have a higher interest rate.

Auto Approve: Top Choice for Refinancing

Auto Approve works with a network of lenders like credit unions, banks and dealerships to provide refinance loan offers. Borrowers with the best credit can get rates as low as 2.94%. Since Auto Approve specializes in refinancing, its customer service staff know how to handle any refinance situation. The company has many positive reviews on Trustpilot, where it has an average rating of 4.7 out of 5.0 stars.

MyAutoloan: Best Low-rate Option

With myAutoloan, potential borrowers can find offers for new and used car loans, refinance loans, private party loans and lease buyouts. Getting a better interest rate is key to lowering car loan payments, and if you have a decent credit score, it’s a good idea to check out myAutoloan. The company’s lender network can offer rates as low as 3.99% for new vehicle loans and 2.49% for auto refinance loans. The company has a 4.2-star average rating from Trustpilot reviewers.

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.

Here are the factors our ratings take into account:

• Reputation (30% of total score): Our research team considered ratings from industry experts and each lender’s years in business when giving this score.
• Availability (20% of total score): Companies that cover a variety of circ*mstances are more likely to meet borrowers’ needs.
• Loan Details (15% of total score): We considered the types of loans, term lengths and loan amounts that are available from each lender to determine this score.
• Rates (25% of total score): Auto loan providers with low APRs scored highest in this category. Available discounts were also taken into account.
• Customer Experience (10% of total score): This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness and helpfulness of each lender’s customer service team.

*Data accurate at time of publication.