These Cars Are Driving Me Nuts

Article: These Cars Are Driving Me Crazy

“What’s the best way to get back on your feet? Miss two car payments.”

That actually might not be the most terrible idea. The car payment crisis in America is a serious issue that affects many households. Auto loan debt is the third largest debt category in the US, coming in just behind mortgages and student loans. According to data from the 3rd quarter 2022 Experian report, the average new car payment in the United States is $700 per month, while the average used car payment is $525 per month. These figures do not include taxes, insurance, and other related expenses, which can add hundreds of dollars to the total cost of car ownership.

What About Leasing? Isn’t it cheaper?

Leasing a car is considered by some to be a more affordable option than purchasing a new car, with the average lease payment coming in at around $597 per month. However, it's important to note that when you lease a car, you do not own it and will need to return it at the end of the lease term. This means that you'll have to start the process over again and potentially face higher payments if car prices have increased in the meantime. At the end of the day, it’s difficult to get out of the quicksand trap of leasing, and it is generally the most expensive way to finance a vehicle in the long term.

The average auto loan balance in the United States for new cars is $41,665 and $28,506 for used. The total auto loan debt in the country is a staggering $1.5 trillion. This level of debt can be difficult to manage, especially for those who are already struggling to make ends meet.

So, what can you do if you're struggling with auto loan debt? Here are a few tips:

1. Negotiate a lower interest rate with your lender. If you have a good credit score, you may be able to negotiate a lower interest rate on your auto loan. This can save you hundreds or even thousands of dollars over the life of the loan.

2. Refinance your auto loan. If you have a high interest rate on your auto loan, refinancing may be a good option. By refinancing, you can get a lower interest rate which could help you pay less interest .

3. Sell your car and pay off the loan. Okay, okay, missing payments on your car isn’t actually a good idea like I alluded to earlier. However, if you're having trouble making your car payments, selling the car and paying off the loan may be the best option. This will allow you to get out from under the debt and avoid defaulting on the loan. If you can afford to get rid of a second car, or exchange a “new” car for a more affordable used one, you will find the burden of a payment can be relieved.

So what’s the main takeaway?

Get out of auto loan debt as quickly as possible. It’s holding a huge part of your income hostage, preventing you from doing things that may be more important to you.

Think about your own life for a moment. Do you have an auto payment? What could you do with the money you’re putting towards that vehicle? It could go to family outings, savings for emergencies or other sinking funds, or even saving for another car purchase down the line! Eliminating that payment could help you accelerate payments on other debt to get you totally DEBT FREE. The car payment crisis in America is a serious issue, but it's one that can be addressed with careful planning and the right strategies. If you're struggling with auto loan debt, don't be afraid to seek help and explore your options. Click here to schedule a free consultation to get set up for success.