How to Lower Monthly Car Payments in Canada
How to Lower Monthly Car Payments in Canada
Posted on May 18, 2022
Your auto loan is a significant outgoing each month, second only to rent or mortgage for most of us. Any way we can lower that payment can have far-reaching benefits, which is what today’s post is all about. Our Halton auto loan team has come up with four different ways to lower your monthly payments without having to sell your car.
Choose a longer loan term
If you’re planning your auto loan, the easiest way to minimize monthly payments is to go for a longer term. Stretching the loan amount over more months means more chances to pay it off, which results in smaller monthly payments.
It will cost more over the length of the loan but if the monthly payments are a priority, that may be a cost worth bearing.
Put more money down
Putting more money down will reduce the overall loan amount, which will also lower the monthly payments.
Your down payment can lower the overall amount, reduce payments, improve your chances of qualifying for the loan and reassure lenders you’re a lower risk. All good things when you’re looking at auto loans in Welland!
Refinance the auto loan for a lower rate
If you’re a year or two into your auto loan, you may be able to refinance it for a lower rate. If you got your loan when rates were high or have improved your credit score since taking out the loan, you may be able to get a lower rate.
That lower rate means paying less interest over the term and each month, which could lower your monthly payments too.
Refinance over a longer term
If you’re considering refinancing your Halton auto loan, you could also extend the term. This would also lower your monthly payments, perhaps significantly.
There is a downside though. As interest is applied over the term, you’ll pay more interest over that term. Your monthly payments would be lower but the total interest will be higher.
Again, you can refinance for a lower amount if you have equity in the car which can reduce that monthly payment too.
Trade down
If you’re driving an SUV or premium car, you could trade down to a cheaper car to lower payments. This would only work if you’re in the upper range of vehicles but is a viable way to lower your monthly loan payments while keeping a car.
For example, you could trade down from a Lincoln to a Ford, save money and still buy a very nice car to get you to work.
As long as you have sufficient equity in your current car to make this worthwhile, it can be a simple, relatively painless way to lower your monthly outgoings without having to live without a car.
Buy used instead of new
If you’re looking more speculatively at lowering your monthly outgoings, buying a used car instead of a new one next time could also make significant monthly savings.
Buying a used car that’s a year or two old could save you 30-40% on the price while still giving you some of the latest tech and a newer model. If you’re not worried about driving the very latest models, this can be a viable way of driving quality without paying for it!
This is more suitable if you’re okay now but would ideally like to lower your obligations later.
Used car loans tend to charger higher interest rates but the overall amount you’re borrowing will be lower, which could be the saving you’re looking for.
Talk to your lender
If you need to reduce your auto loan payments because you’re in financial difficulty, talk to your lender.
We all want you to succeed and we all want you to be able to pay off your loan. Lenders have a range of options they can use to help and may be willing to use them to help you.
Make sure to discuss it with them before you miss a payment though. They are much more amenable if you discuss your situation before falling behind!
If you need help or advice on anything to do with auto loans in Halton, contact Car Nation Canada today, we can help!
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