The average U.S. car buyer typically puts more than 10% down when buying new or used vehicles. For many people, a car loan payment represents a huge chunk of the monthly budget. It’s important to be strategic about this type of debt, whether you already have an auto loan or plan to take one out in the future.
Keep reading to learn how to lower your car payment in order to help you reach your financial goals.
Key Points
• One way to lower your car payment is by building your credit score. This can help you qualify for lower interest rates, which reduces your monthly car payment.
• Putting more money down upfront can lower the loan amount and reduce your monthly payments.
• Opting for a shorter loan term can decrease the total interest paid, leading to lower monthly payments.
• Haggling with the dealer to lower the car’s purchase price can directly reduce your monthly payments.
• If you already have a car loan, refinancing to a lower interest rate can help lower your monthly payments.
1. Put Down a Large Down Payment
A larger down payment lowers the overall size of your auto loan. That helps you save money in several ways. The first is that you’ll have a lower car payment because your principal balance is smaller. You also won’t pay as much interest over the life of the loan, which saves you money over time.
What’s the right down payment size if you need a car loan? Your personal circumstances may dictate what the right down payment size is for you, but a larger down payment typically can reduce your total borrowing costs. Here’s an example: A car buyer making a 12% down payment on a $41,000 new vehicle would amount to $4,920, bringing the actual loan amount to $36,080.
On a five-year loan with a 4% interest rate, that down payment would lower monthly payments from about $755 to $664. And a larger down payment could help you qualify for a lower rate, amounting to even more savings over the life of your loan.
A down payment may not be necessary to get a car loan, but borrowers are generally expected to provide proof of identity and proof of income when applying for financing, among other auto loan requirements.
Recommended: Smarter Ways to Get a Car Loan
2. Refinance for a Lower Interest Rate
Refinancing your auto loan could help you qualify for a lower interest rate. That could reduce your monthly payment if you keep the same loan term.
There are a few different ways you can get a cheaper car payment by refinancing. For example, if you’ve built your credit score over the months or years since you initially took out the loan, you could potentially now qualify for better loan terms with auto refinancing.
Refinancing for a lower interest rate and shorter term can help you pay your car off faster and for less money over the life of the loan, but it may increase your required monthly payment as well.
A car refinance calculator can help you see whether a refinanced loan offer may increase or decrease your total interest costs.
3. Refinance for a Longer Term
Wondering how to lower your car payment even if you don’t think you can get a different interest rate? You can also refinance your auto loan to stretch out your balance over a longer period of time. That means your remaining balance is split into more payments. The good news is that you’ll pay less each month. The bad news is that you’ll pay more in interest over time, since you’re making those payments for longer.
Here’s an example of how a longer-term auto loan could impact a borrower’s finances in the near term and long term: Let’s say a borrower has a $20,000 loan for 48 months with an interest rate of 4.09%. The monthly payment would be approximately $452, and the total interest paid over the life of the loan would be roughly $1,715.
Compare that to refinancing for a longer term. Maybe the borrower’s financial situation has changed since taking out the loan, and they want to cut their monthly budget as much as possible.
Extending the $20,000 balance to 60 months (adding an extra year) would drop the monthly payments to about $369, but total interest would reach approximately $2,149. In other words, it may not be the best financial decision for long-term savings, but refinancing to a longer term can help someone navigate their immediate financial challenges.
4. Buy or Trade In for a Less Expensive Car
Another strategy on how to get a cheaper car payment is to swap out your current car for a less expensive model rather than a high-maintenance luxury car. (If you own the more expensive vehicle, you can benefit even more by trading it in as part of your down payment.)
The average new car costs $48,799 as of May 2025, according to Kelley Blue Book, but that doesn’t mean you have to spend that much. By comparison, the average used car listing price stood at $25,565 in 2025.
Here’s the difference in how those two prices look in terms of monthly payments, assuming both have a 60-month term and 7% interest rate:
A $48,799 car loan would result in a monthly payment of about $966, and interest payments would total about $9,177 over the life of the loan.
A $25,565 car loan with the same terms would have a monthly payment of about $506 and cost about $4,808 in total interest over the life of the loan. Trading in your used car can reduce the amount of money you need to borrow when shopping for a new or used vehicle. This is one of the tips on how to lower a car payment without refinancing an existing loan.
Recommended: How to Sell a Car You Still Have a Loan On
5. Talk to Your Lender
In some cases, it’s possible to change the terms of your loan by talking to your lender directly rather than refinancing, particularly if you’re experiencing some type of financial hardship. You could potentially defer payments if you’ve had a temporary setback, or you could negotiate a longer term.
The advantage is that you’ll avoid hurting your credit score and accumulating late fees. The disadvantage is that your auto loan interest will continue to accrue as you push back or extend payments.
6. Lease a Car
Getting a car lease is another possible way to get a cheaper car payment. Rather than taking out a loan to eventually own a car, you simply rent it for a set period of time. Once the lease is over, you can either return the vehicle or buy the car if your agreement allows for it.
Lease payments typically cost less than auto loan payments. But instead of the money going toward your equity in the car, that money pays for the depreciation of the vehicle while it’s in your care. There is typically a warranty so that you’re not responsible for most mechanical issues that may pop up. And since the average new car lease runs for about three years, you may not have to worry about frequent breakdowns like you might with an older car.
There are a couple of downsides that offset the potential month-to-month savings. First, by continually leasing a car, you’ll always be making payments and won’t have any trade-in value when your lease ends. Also, there is usually an annual mileage restriction when you lease instead of buy. You have to pay a fee if you go over the mileage limit or inflict any excessive wear on the vehicle.
Recommended: Guide to Buying Out a Car Lease
7. Choose a Less Expensive Car to Purchase
Buying a less expensive car can reduce the amount of financing you need to borrow, which can minimize your monthly payment. For example, a new Ford F-150 pickup truck in the fourth quarter of 2024 carried an average monthly loan payment of $919 while a less expensive Honda Civic compact car carried an average monthly loan payment of $557, according to Experian.
This illustrates how buying a less expensive car can lead to a more affordable loan payment than buying a more expensive car. This tip provides a possible path on how to get a low car payment when shopping around for a new or used car.
Recommended: Down Payment Size and Auto Loans
8. Reduce Your Payment Before Purchase
Below, we highlight several ways you may reduce your borrowing costs when shopping around for a new or used car:
Upfront Sales Tax
Car buyers in most states generally have to pay sales tax on the vehicle purchase, which affects the amount of money you may need to borrow to finance the purchase. Only five U.S. states — Alaska, Delaware, Montana, New Hampshire, and Oregon — have no sales tax.
Some states may provide a sales and use tax exemption on the purchase of a vehicle for certain buyers. Virginia, for example, exempts certain disabled veterans from its sales and use tax on cars. If you’re exempt or excluded from paying a car sales tax, that may allow you to secure a more affordable car loan.
Pay Off Other Debt First
Lenders may consider your credit score and debt-to-income ratio when deciding whether to approve or deny your application for auto loan financing. Paying off other debt first may improve your odds of approval and may help you secure better financing terms.
Shop Around and Compare Terms
Shopping around and comparing terms can help you choose an auto financing package that’s right for you. Some lenders may charge higher APRs than other lenders.
Using Your Car to Earn Money
Below, we highlight several ways you may use your car to earn money:
Rent Your Car Out
If you own a car and don’t wish to drive it, you can earn money by renting out the car to prospective customers. Peer-to-peer car-sharing apps may help you rent out your car as a side business.
Delivery Driving
If you own a car and have spare time on your hands, you might be able to earn wages as a delivery driver. Taking up such gigs could involve delivering food orders to people’s homes and workplaces.
Ride-Sharing
If you own a car and wish to explore a possible side gig, you can explore opportunities to work as a rideshare driver. You can pick people up on demand and take them to their destination for a fee.
Is Lowering Your Car Payment Always Ideal?
Lowering your car payment is not always ideal if you can afford higher car payments in a shorter term. Lowering your car payment by refinancing for a longer term may cause you to pay more interest charges over the life of your auto refinance loan.
Securing a lower car payment by making a large down payment may be ideal if you can afford the upfront transaction costs. A large down payment can minimize your borrowing costs and may also help prevent your auto financing from becoming an upside down auto loan.
Recommended: How to Calculate Car Depreciation
The Takeaway
Lowering your monthly car payment is not necessarily impossible. In fact, there are many ways you may be able to do it, depending on what you need and what makes sense in your situation. For some people, refinancing for a lower interest rate may do the trick, while for others, opting to switch to a lease might be a good option.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
Is it possible to lower a car payment without refinancing?
Yes, it is possible to lower a car payment without refinancing. One of the ways this could be achieved is if the borrower and lender agree to a loan modification that changes the terms of the existing loan agreement.
Can you get out of high car payments?
Yes, you can get out of high car payments if you qualify for auto loan refinancing. Auto refinance loans may provide lower monthly payments by giving you a new loan that includes a lower interest rate or longer term. (You may pay more interest over the life of the loan if you refinance with an extended term.)
Does paying down principal reduce car payments?
Paying down principal reduces your loan balance until you finish repaying the loan in full. If your car loan features no prepayment penalty, you can pay the loan off faster and minimize your interest costs by making extra payments toward the principal.
Photo credit: iStock/Nikola Stojadinovic
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