Average New Car Payment Reaches $ 656. Here’s How to Pay Less

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You can slash your car payments by making a few smart choices.

Key points

  • Rising car prices are leading to higher auto loan payments.
  • Auto loans can get even more expensive now that interest rates are climbing.

Like many other commodities, the cost of a new car has soared over the past year, due to a lack of supply. And that means drivers need to buy a vehicle on a monthly basis.

The average monthly payment for a new car is just $ 656, according to May data from Edmunds.com. That includes a financing rate of 5.1% and a 70.5-month payoff period.

And that’s not the worst news for drivers. Since the Federal Reserve is raising interest rates, auto loans are likely to get more expensive in the coming months.

If you expect to buy a car in the near term, you could end up with a lot of money. Here are some steps you can take to keep your costs down.

1. Get a used car instead of a new one

Cars tend to lose value once driven off the lot. And that’s just one reason to opt for a used car instead of a new one. Edumunds.com reports that the average monthly payment for a used car is $ 546. Now that’s not a small amount of money, but it is is A new car on average monthly payment of less than $ 100.

Now you may be worried that buying a used car will cost more than the average cost of repairs, since it may not be the same warranty as a brand-new vehicle. But if you buy a certified used vehicle, you can be more secure in the fact that the car you’re buying is in decent shape.

New cars today tend to come with loads of features that salespeople will try and convince you are essential to the driving experience. But if you’re able to pay for your features, you can keep your automobile costs down.

Also, the more features your car has, the more features you have to pay to fix the line. So that’s another reason to skip the bells and whistles.

3. Make sure your credit score is in good shape

The higher the interest rate on your auto loan, the more money it will cost you. And if you have great credit, you may be able to snag a better rate than the average borrower.

Generally, a great credit score is one in the upper 700s or higher. If your score isn’t there yet, you can boost it by spending all your bills on time, knocking out a credit card on your credit card, and correcting errors on your credit report.

Don’t overpay for a car

Owning a car is one of the most expensive prospects of maintenance costs, auto insurance, and the ever-rising price of gas. And so it pays to do what you can to keep your car payments to a minimum.

There is a chance vehicle prices will remain high for the rest of the year as supply chains attempt to catch up to buyer demand. And if you know you need a car, make the above moves to avoid busting your budget.

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