How it works
Your car payment depends on the amount financed, the interest rate, and the loan term. A longer term lowers the monthly payment but increases total interest.
Loan amount = Price − Down payment
How to lower your car payment
The three levers are the amount financed, the interest rate, and the loan term. A larger down payment shrinks the amount financed; a better credit score lowers the rate; a shorter term saves interest but raises the monthly payment.
- Make a larger down payment
- Shop lenders for the best rate
- Choose the shortest term you can comfortably afford
New vs. used car loans
New cars often qualify for promotional rates, but used cars cost less to finance because the loan amount is smaller. The total cost of the car matters more than the monthly payment alone.
Watch out for long loan terms
Loan terms of 72 or 84 months have become common, and they make the monthly payment look cheaper. But you pay far more total interest and can end up owing more than the car is worth for years.