How to Lower Your Car Payment

1. Improve Your Credit Score

Before applying for a car loan, check your FICO^® Score^Θ. If your score isn't as high as you'd like it to be, see what you can do to improve it. The higher your score, the lower the annual percentage rate (APR) and monthly payments likely will be.

So, let's say you're looking at a $35,000 auto loan with a 60-month term on a new car. Our scenario assumes a $2,500 down payment with no trade-in.

According to data from Experian's State of the Automotive Finance Market report, an excellent credit score could land you an average APR of 4.41%. This would lead to a monthly payment of $605 for the new car in our scenario.

With a poor credit score, however, the average APR jumps to 16.11%. That would result in a monthly payment of $792, which is $187 higher than the payment with an average APR of 4.41%.

During a 60-month loan term, you'd end up paying $15,034 interest on the 16.11% loan, compared with $3,774 for the 4.41% loan.

2. Compare Car Loans

Just as you should shop around for car insurance, you should shop around for a car loan. When searching for a car loan, consider the:

• Interest rate: The interest rate, shown as a percentage, is the cost of borrowing money. It doesn't include fees charged by the lender.
• APR: Also shown as a percentage, the APR combines the interest rate and fees to provide a clearer idea of how much you're paying to borrow money. A higher interest rate and APR typically result in a higher monthly car payment.
• Estimated monthly payment: When you've settled on the interest rate, APR and car loan term, calculate what the monthly payment would be.
• Loan term: Be sure to compare loans of the same term length. A longer loan will mean a lower monthly payment, but you'll end up paying more in interest over the life of the loan.

3. Refinance Your Car Loan

One path to possibly scoring a lower car payment is refinancing your loan.

Experian data shows that in the second quarter (Q2) of 2026, consumers who refinanced cut their average rate by more than 2.4%. As a result, refinancing saved consumers an average of $83 per month.

4. Pick a Longer Loan Term

A longer loan term, such as 72 months versus 60 months, can cut your monthly car payment.

Most car loans offer terms in 12-month increments. The most common term for a car loan is 72 months (six years). Generally, the longest available term is 96 months (eight years).

Lengthening the term of a car loan comes with drawbacks, though:

• Lose more value: Your car will likely lose more value over 72 months than it would over 60 months. Unfortunately, that could result in owing more money than the car is worth.
• Pay higher overall cost: Although your monthly car payments may decrease with a longer loan period, you'll probably pay more in the long run in the form of interest and fees.

5. Make a Bigger Down Payment

Making a bigger down payment when you buy a car can also reduce your car payment. How? A larger down payment typically means borrowing less money to buy a car.

It's recommended that your down payment be at least 20% of the purchase price for a new car and at least 10% for a used car.

If you can hold off on buying a car, taking time to save money for a down payment may lead to lower car payments.

6. Choose a Less Expensive Car

If you downsize your expectations, buying a less pricey car should lower your monthly car payments.

Say you've been eyeing a swanky car selling for $100,000. The sticker shock might deter you. If you make a $20,000 down payment and secure a 60-month loan with a 5% interest rate, your monthly payment would be around $1,500.

But let's say you settle on a less luxurious car priced at $40,000. If you make an $8,000 down payment and secure a 60-month with a 5% interest rate, your monthly car payment would drop to about $600.

That would be a monthly difference of around $900, making the $40,000 car a far more budget-friendly option.

7. Buy a Used Car

You may shave thousands of dollars off the price—and, therefore, decrease your monthly payment—if you buy a used car instead of a new car.

Experian data from Q2 of 2026 shows the average loan for a new car was $43,610 versus $27,852 for a used car. During the same period, the average monthly payment was $765 for a new car compared with $542 for a used car. That's a gap of $223 per month.

Keep in mind that while the average loan term for a used car was slightly lower, the interest rate was considerably higher: 11.19% for a used car on average compared with 6.35% for a new car.

8. Lease a Car

Generally, leasing a car means lower monthly payments than when you take out a car loan.

The big catch is that you won't own the car when the lease expires. The lease payments essentially cover the amount that the car's value will decline during the leasing term but don't give you equity in the vehicle.

Auto lease calculator

The Bottom Line

Improving your credit score, comparing loan offers and refinancing your loan can help lower an auto loan payment. Stretching out the loan term reduces monthly costs too, but it piles up interest over time.

On the purchase side, a bigger down payment, a cheaper car or a used car can shrink the payment. Meanwhile, leasing offers another route to lower monthly costs in exchange for never owning the vehicle. Before shopping for a car loan, get your credit report and FICO^® Score for free from Experian to help understand what loan rates you might qualify for.