How to Reduce Your Monthly Car Payment

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How to Reduce Your Monthly Car Payment

Hey, we all want to spend less. So let's take a peek at how to reduce your monthly car payment.

Buying a vehicle is probably the 2nd most expensive purchase you'll make, second only to buying a home. If you’re like most people, you won’t have the cash just sitting around and will need to secure a car loan.

Well informed vehicle buyers can use a variety of different options to greatly reduce their monthly payment. This in turn lowers the interest paid and cost of borrowing related to the purchase.  Below we will discuss the best ways to lessen the financial burden of borrowing money for your vehicle.

So here we go: How to Reduce Your Monthly Car Payment

Down payment

One of the most impactful ways to lower your monthly car loan is to save up for a down payment.

First off, most buyers will put the equity from their trade-in as a down payment. So if you're trading in a 2012 KIA Rondo for a 2021 KIA Soul, the dealership will pay you several thousand dollars for the Rondo. That cash goes towards the new Soul. You can also sell privately and use the cash towards your new ride.

This is a great start - but putting down additional money can significantly reduce your monthly car payment. Please refer to our article entitled How to Buy a Used Vehicle From a Dealership to better illustrate the effects of down payment and interest rate. Which naturally leads us to…


Interest Rates

The interest rate at which you lease or finance a vehicle can ultimately have the largest effect on your monthly payment. Interest rates can fluctuate but are determined by your credit score, debt-to-income ratio, the vehicle you choose, and the lender you decide to go with.

Perform a credit check if you are unaware of your current credit score, and read our article What You NEED to Know About Your Credit Score. This is vital as it will give you a better idea of which rates you should be qualifying for. You can use this information to shop around on interest rates or even get pre-approved (see our article: How to Get Pre-Approved For a Car Loan) from a lender before going to the dealership.

Better yet, book a confidential credit appraisal. You will be put in contact with one of our Financial Services Managers for a confidential telephone or in-person meeting. If you're worried about your credit, this will give you all the information you need to confidently shop for a vehicle. 

If your credit score isn’t in a great spot consider focusing on paying off any loans and debts for a few months to increase your score and qualify for better rates. Every on-time payment makes a difference. 



If you are someone who loves driving new vehicles and trades-in your vehicle every few years for an upgrade, why not consider leasing? Available on new vehicles, leasing means you only pay for the car’s value that you use (depreciation), but you never own the car outright.

Still not sure if leasing is right for you? Don’t worry, we have a quick article and questionnaire here that will help you decide if leasing or financing is the best option for you. 


Longer-Term Finance

While you will pay more interest in the long run, increasing the length of your car loan can significantly reduce your payments. If you are considering a new vehicle purchase most manufacturers offer good interest rates even on longer terms (60-84 months). Although the term is long, the interest you pay can be lower compared to a less expensive used vehicle with a higher interest rate.

On top of this, all auto loans are open-ended, which means you can pay it off completely at any time with no penalty. Taking a longer-term finance term gives you the flexibility to have more of your budget available but you are still able to pay down your loan if the money isn’t needed. 


Refinance Your Loan

If your financial situation changes and you are struggling to keep up with your current monthly payment, consider refinancing your current loan. The remainder of your loan is refinanced over a longer period of time. This will reduce your monthly payment, but at the cost of paying more interest over the course of the loan.

It’s important to note that this option is not available through KIA or other car manufacturers, so contact multiple banks or other lending institutions to shop for the best interest rate. In general, newer vehicles will qualify for lower interest rates over longer terms. If your credit has increased since you originally purchased the vehicle you may even be eligible for a lower interest rate. 


Trade Down to a Less Expensive Vehicle

If you feel overwhelmed by your current auto loan, trading in your vehicle for a less expensive one will immediately lessen your payment. Driving a less expensive vehicle might be necessary until other debts and costs are paid. Any positive equity found in your current vehicle can be used as a down payment to reduce the loan cost further. Which leads to an even lower payment or shorter loan term.


Advantages of Bi-Weekly Payments

A bi-weekly payment is made once every two weeks. You still pay the same amount for the vehicle itself. However, you pay off your loan faster and with less interest compared to semi-monthly, or monthly payments.

The reason for this is you are making 26 payments a year instead of the 24 semi-monthly or 12 monthly payments. This won’t outright reduce your car payment like the other options covered but can be used in addition with our other strategies. A bi-weekly payment calculator does a great job of illustrating the advantages of this approach. 



Using a combination of the strategies we discussed you can significantly reduce your monthly auto payment. This lets you drive “more car” for a similar monthly payment or lets you to spend that hard earned money on other expenses and debts. 

At KIA Victoria, we're always here to help. Book a confidential credit appraisal with one of our Financial Services Managers for a confidential telephone or in-person meeting. Read our articles in the Learning Library. Give a call or just pop by for some help too. 

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