A car with a high car payment.

Get Out Of A High Car Payment

Stuck in a high car payment? It happens, maybe it was a payment that you could once afford with no problem or maybe your eyes were just bigger than your wallet when you visited the dealership. Wither way, you need out and we are here to help you.

It is a question that is asked all the time. How can I get out of a high car payment? If this is what you are asking yourself, you have two main options that will work to accomplish this goal. The first is to refinance the loan and the second is to sell the car outright. If you are behind on the vehicle, refinancing it is the only option unless you can bring cash to the table. Let’s talk about that first.

Refinancing Reduces Your Car Payment

Refinancing your auto loan can make an unbearable payment much more manageable. Best of all, the process is usually fee free and relatively painless. The lender will do most of the work. Here is how refinancing can help you cut that payment down.

Lower Your Interest Rate

First, you could save with a reduced interest rate. This is what most people are seeking when they refinance their vehicle. If you can save 2 points or more on your interest rate, it is well worth it to refinance, especially since there is no charge to do so.

To get the best rate, you need to have as good of a credit score as possible. Luckily, having a good credit score is no mystery. Everyone can do the same exact things to get a good rating. It is not a mystery, credit ratings are formulas.

Pay Your Bills On Time

You should mainly try to make all of your bills on time including your auto, of course. This is one of the keys to a good credit rating and can represent up to a third of your credit score. If you have had some late pays in the past, they can be overcome. After six months of paying your bills on time, the effect of the late payments will begin to diminish.

Keep Your Balances Low

This is easily the second biggest factor in having a good credit rating. Lenders want to see that you have credit available to you and that you can use credit responsibly. Having all of your credit cards maxed out will have a big negative effect on your credit and will hurt your chances of saving money on your auto. The ideal debt percentage is 30% and under. Far away from that number? Don’t worry, your credit score will incrementally improve as you approach this number. So, get your balances as close to 30 percent as you can for the best score.

Here is a little trick to get those balances down. Ask for a credit line increase. If you owe 1000 dollars on a 2000 dollar card, you are at 50%. Get that limit raised to 3000 dollars and you are suddenly at 33%. Easy, just call and ask for an increase.

Stretch Out Your Loan Term

A second way that refinancing can help is by stretching out the term of the loan. Even if you only qualify for the same rate that you currently have, you can save this way. If your original loan was for 60 months and you pay on if for 6 months, you have reduced the principal of the loan. Get a new loan for 60 months and your loan payment will go down.

Take a $30,000 loan for 60 months at 10% interest. Your payment is $637. Pay on it for 6 months and you now owe $27,626. Refinance that for 60 months at 10% interest again and your new payment is $586. That is a savings of $51 a month which can really add up.

Selling Your Auto Will Eliminate Your Payment

Of course, the ultimate solution to get rid of that high car payment is to eliminate your debt completely by selling it. This is also the toughest option but it can be done. Hopefully, you have been paying on your vehicle for a few years so that you have some good positive equity. If not, you still might have options depending on the type of vehicle you have and how it holds its value.

Selling your vehicle will require you to do some work but it is, like i said, the ultimate option. It would allow you to start from scratch with a cheaper vehicle that would afford you a much cheaper payment. You could also just purchase a vehicle outright and live payment free if you get enough in return for your car. Here are your options for selling your vehicle.

Sell Your Car Yourself

The toughest option but one that will yield you the most money. This might be your only option if you have very little equity in your vehicle. List your vehicle on local classified websites and on major online publications like Auto Trader or Cars. Always give yourself a little buffer with price so that you can come down a bit. Ask a few thousand more than your bottom dollar. Once you have an accepted offer, you will have to do an extra step to sell the vehicle. Since you do not have a title in hand, you and the borrower will need to visit your bank to pay off the vehicle and get them the title. It is a minor extra step which most buyers will not mind since it will also add legitimacy to the sale

Sell To A Major Dealer

This is the easiest route. Most dealers will buy a vehicle off the street, even if you are not buying one from them. They will give you a wholesale price though so hopefully you have some equity. The good thing about this is that it is easy. They will handle all of the details of paying off your old lender and you will have confidence that it will be done since they are a big company and not some guy off the street. In addition, you will not have to deal with people coming to you and wanting to test drive your car. One stop and you will be done.

Trade Your Vehicle In To A Dealer

If you intend to purchase another, cheaper vehicle, a trade in will be just the thing. This can help you dispose of the vehicle even if you have a bit of negative equity. The dealer can buy your vehicle and add any negative equity to your new note.

Be careful with this option as you will be paying monthly on old debt. If you are upside down on a loan and need to get a cheaper payment, this can get it done as long as the new vehicle is considerably less money than your old one.

Watch out for the extremely long loan terms that many dealers like to offer to get payments down. They often use terms of 12 months or even 24 months more than normal to drive a payment down. This may result in you owning a vehicle down that road that is worn out with years of payments to go.

Wrapping Up

As you can see, there are a lot of ways to get out of a car payment that is too expensive. Consider all of your options and choose the one that makes the most sense for your particular financial situation.

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James Car is a finance, loan and budget expert based in the United States. After attending Brookhaven college, he went on to become a successful entrepreneur. He now enjoys writing articles that help people save and make the most of their money.