4 Ways To Stay Ahead on Your Car Payments
Written by
Ashley Donohoe
Edited by
Cory Dudak
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If your monthly car payment seems overwhelming, higher interest rates and vehicle prices may have contributed to your financial strain. Edmunds reported record-high payments in the last quarter of 2023, and new car payments of at least $1,000 were a reality for 17.9% of buyers. To better manage your car payment and avoid default, try these four tips to stay ahead.
1. Bring in Extra Money
Extra income can go a long way toward making your car payments and other expenses more manageable. You have several options, including second jobs and lucrative passive opportunities, that might suit your financial situation and preferences.
You could try renegotiating your wages or landing a higher-paying position at your current company. Finding a part-time job or doing flexible gig work is worth considering if you have the extra time. For passive income, consider dividend-yielding investments or room rentals.
2. Lower Your Monthly Spending
If you look at your budget, you might realize that other monthly costs are causing you to struggle with making your car payments. To free up cash, cut out nonessentials and reduce as many required expenses as possible. Here are some ways to make cuts:
- Swap out paid subscriptions for free entertainment sources.
- Use coupons and shop for deals on household staples.
- Use food from home to cut restaurant bills.
- Shop for cheaper car and homeowners insurance policies.
- Optimize your utility usage.
- Negotiate your TV, phone and internet bills.
- Avoid retail therapy and impulse purchases.
- When practical, purchase necessary household items secondhand.
3. Save Your Spare Cash
Making it a habit to save rather than spend your spare cash will help you stay ahead on your car payments. First, you can turn to those savings if you have a financially tough month and worry you’ll miss your car payment. Plus, you can earn interest on this money with a high-yielding money market or savings account.
Consider options such as rounding up your debit card purchases or setting up small recurring transfers to get started with saving. You can also stash away windfalls such as tax refund checks, gifted money and work bonuses.
4. Plan Your Way Out of Auto Debt
Although your car note might have a payoff date years away, escaping sooner is a good move. On the Ramsey Solutions blog, Rachel Cruze wrote, “Paying off your car might not be the first thing that comes to mind when you look at your budget, but if you have a car payment, it’s really stealing from your income.”
Although an early payoff may take a lot of sacrifice, you’ll no longer struggle with the monthly payments afterward. Your budget will have more room for saving toward your financial goals and covering everyday expenses. Plus, you can reduce your total interest.
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