Auto payments are still at record levels.  Here's what you can do about it

Auto payments are still at record levels. Here’s what you can do about it

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There are ways to buy a new car without breaking the bank.


the main points

  • Average car payments hit a new high in July of $733, while the average cost of a new car was more than $48,000.
  • Shopping evaluation and improving your credit score can reduce the cost of borrowing.
  • Reduce the amount you borrow by choosing low-cost cars and paying more up front.

The cost of buying a car continues to increase. The average monthly payment for a car hit a record high of $733 in July, as car buyers struggle not only with rising prices, but also with higher borrowing costs. Microchip shortages, supply chain issues and factory closures have driven up auto prices. According to the latest Cox Automotive/Moody’s Analytics Index of Vehicle Affordability, the average cost of a new vehicle was $48,182—also a record high.

If you’re in the market for a new car, it’s soul-wrenching to watch prices spiral up, especially as you struggle with rising costs in other parts of life. Furthermore, low inventory and high demand means you may be paying more for a vehicle that isn’t even what you were looking for.

Here are three ways to deal with standard car costs.

1. Wait a bit

Unfortunately, prices are not likely to drop any time soon. However, if you can delay your car purchase, there may be other advantages. For starters, if your credit score is less than excellent, you can take steps to improve it. Make sure you pay your bills on time, and see if you can reduce the amount of debt you are carrying. You can also check for any errors on your credit report in case your score drops. A higher credit score can help you qualify for better rates, reducing your monthly and total repayment costs.

Delaying your purchase may also allow you to save more on your down payment, so that you can reduce the amount you borrow. In a perfect world, you wouldn’t have to borrow anything to buy a car, but that’s not an option for everyone. If time is on your side, you can also try to get a factory car directly from the manufacturer. Even if it doesn’t reduce costs, it at least means you’re getting the car you want.

2. Compare prices

Shopping for a car loan can make a big difference to your costs. Don’t assume you’ll get the best deal from your car dealership. Instead, aim to get pre-approved for the best rate before you even begin negotiating rates. Our list of the best auto loans is a good place to start.

If you’re worried that shopping by price will damage your credit score, don’t panic. Lenders an act Take a tough credit check, which will affect your score. But as long as all the checks come in within a short period of time (ideally two weeks), the credit rating agencies consider it just one inquiry.

If you tend to reduce your monthly costs by extending the term of the loan, you are not alone. People are starting to get more than 72 or even 84 months of car loans. be cerfull. A longer loan term reduces your monthly payments, but you’ll pay more interest overall. It’s also hard to predict what might happen in the coming years, and you may not want to put up with your future self with these monthly payments. Finally, the value of new cars can decline rapidly – you may find yourself in a situation where you owe more than the value of your car.

3. Find ways to cut costs

If you’re looking to spend upwards of $40,000 on a new car, it can seem like a hassle to have to compromise on make and model. However, some low-cost models cost less than half the average car cost. This can significantly reduce the amount you need to borrow, and reduce your monthly payments.

The good news is that you may be able to get more than you expected from trading your current vehicle. The increased interest in used cars means that you may be pleasantly surprised at how much you can get. Get a few different quotes before trying to negotiate with a dealer so you know what your baseline should be.

Finally, consider buying a used car. Sadly, used car prices have also risen dramatically in recent years – so much so that, in some cases, it may be cheaper to buy new ones. However, recent data from CoPilot shows that the used-car market has finally peaked, so there may be some relief in store.

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From higher demand to lower inventory and higher interest rates, the deck is stacked against car buyers. If you need to buy a car, shop for the best prices as well as the least expensive car option. Try to avoid taking on any more debt than you need to, and keep the term of the loan as short as you can. There is a lot of uncertainty right now, and many economists are warning that a recession may be on its way. Car costs may be at record levels, but now, more than ever, is not the time to take on extra debt.

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