Can’t Afford Your Car Payment Anymore? 9 Things You Should Do

Frustrated couple checking bills at home using laptop.
EmirMemedovski / Getty Images

A recently published report from Moody’s Investors Service indicates that new auto loan delinquencies are on the rise. In the second quarter of 2023, the delinquency rate for new auto loans climbed to 7.3%, up from 6.9% in the first quarter.

Moody’s cautioned that new delinquencies on both auto loans and credit cards will keep rising substantially, potentially hitting between 9% and 10% in 2024. That would mark a significant increase compared to the 7% delinquency rate before the COVID-19 pandemic. The report predicts that auto loan and credit card delinquencies will peak in 2024 as economic challenges continue for many households.

Delinquency negatively affects your credit score, which could impact other areas of your life. The good news is that affordable solutions are available, whether you need a way out because you’ve lost a portion of your income or discovered unexpected costs associated with your car loan.

Before beginning any of these steps, you can contact your lender to ask for a forbearance. Doing this will give you a little bit of time to determine what your next step should be so that you don’t make any hasty or emotional decisions.

Estimate Your Vehicle’s Fair Market Value

In order to determine how to get out of a car loan without ruining your credit, you first need to find the answer to the question “How much is my car worth?”

Save for Your Future

Websites such as Kelley Blue Book (KBB) can help you determine your car’s market value. You’ll need to input the make, model and mileage of your vehicle. Next, you can add any upgrade features your vehicle might have. Then, KBB will give you an estimate of what your car is worth.

KBB provides both trade-in value and what a third-party might offer for your car. Typically, the third-party offer is much higher than the trade-in value. However, selling to a third party also takes a lot more work. Kelley Blue Book also offers to connect you with prices offered by local dealers, although these prices are typically near to the KBB trade-in value.

Compare Prices From Companies Like Carvana

While Kelley Blue Book prices have long been the industry standard, they are still only a guide. Although KBB does now connect sellers to local dealers, the dealer price is often close to the KBB trade-in value.

To compare real-world market prices, visit an online car dealer like CarMax, Autotrader, Carvana or Vroom. These types of companies will give you real-world price quotes on your exact car within two minutes if you simply provide your VIN and the car’s condition. Depending on market conditions, this quote may be more or less than what you find from Kelley Blue Book.

Save for Your Future

One of the added benefits if you go through an online company like Carvana is that it can come and pick up your car in a completely contactless transaction. This can be a safer alternative than visiting your lienholder in person or transacting with a third party — and it saves you the travel time.

Another plus, particularly if your car loan is causing severe financial stress, is that a transaction like this can result in cash in your pocket within days. Working through a third party or even a bank may require lots of negotiation and delays in the payment process.

Sell Your Car

Once you find out how much your car is worth, you’ll want to sell your vehicle if it’s valued at a comparable or greater amount than the loan. recommends contacting the lien holder to discuss closing out the loan and obtaining the title to sign over to your buyer. Often, it’s possible to complete this transaction right at the office of the lending institution.

Allow Someone Else To Assume Your Loan

Consider allowing someone else to assume the loan. A car loan transfer is an excellent option if you have negative equity in your car and you won’t make any extra money by selling it. Contact your lender to see if another individual can assume your loan. That person will likely need to agree to a credit check and meet certain income-to-debt criteria for approval.

Make Payments on Your Upside-Down Car Loan Until You Break Even

Having an upside-down car loan means the amount you owe on your loan is higher than the car’s value. If the car that’s giving you buyer’s remorse won’t net you enough money to pay off the loan when you sell it, then you’ll want to keep making payments on the loan until you reach the break-even point.

Save for Your Future

You can temporarily cut spending or even stop driving your car and cancel your insurance to create funds for vehicle payments. Once you reach your break-even point, you’ll be able to sell the car and subsequently get out of the loan.

Refinance the Loan

Perhaps you’d like to keep your vehicle but want to make the payments more affordable. In this case, explore getting a refinanced auto loan. The car refinance can be done through your current lender or through another finance company.

When you refinance a car loan, you can lower your payments by extending the term of the loan or obtaining a lower interest rate. Wells Fargo and other banks, for example, offer auto refinance calculators you can use to get an idea of what your new payment would look like.

Buy Out the Loan With a Personal Loan

The math doesn’t always work out, but it may very well be possible for you to use a personal loan to pay off your car loan. If the interest rate on your personal loan is lower and/or your term is longer, your monthly payment may fall to an amount that you can afford.

While extending a loan, or even using one loan to pay off another, is not always ideal, in some cases, you may get a double win. If your payment drops to a level you can afford — the first benefit — you can still keep your car, rather than being forced to turn it over or sell it.

Save for Your Future

Participate in a Car-Sharing Program

If you’re not interested in a car refinance, consider how to get rid of a car payment by signing with a car-sharing company. Car-sharing companies such as Turo allow individuals to rent out their vehicles to help pay their car payments and even pay off their loans ahead of schedule.

If you find you can rent out your car for more than your monthly payment, you might be able to both keep your car and make some additional income to boot.

Look for a car-sharing company that protects your vehicle with its own insurance while the vehicle is in use by another driver so that your personal insurance isn’t affected.

Voluntarily Surrender the Vehicle

You also have the option to voluntarily surrender your vehicle if you can’t pay your car loan. Doing this will affect your credit negatively, but it can look much better on your credit report than having your car repossessed, according to credit reporting bureau Experian.

When you turn your vehicle over to the lender, the lender will then sell it. If there’s a remaining balance, you’ll be responsible for paying it. If you don’t pay the difference, it will go to collections, which will also reflect negatively on your credit report. It’s best to work out a payment plan with the lender for the remaining balance.

Save for Your Future

Laura Beck and Alicia Bodine contributed to the reporting for this article.

More From GOBankingRates


See Today's Best
Banking Offers