Make your wheels your own and save hundreds of dollars by paying off your car loan early. You will need Focus and motivation, Budget Creativity, Extra income, Car maintenance and cash.
Step 1. Set up a budget. Examine it carefully to find areas in your expenses where you can cut spending and use the extra money to pay off your car loan.
Step 2. Keep your basic living expenses low. Buy food in bulk, use coupons, grow your own vegetables, bring your lunch to work, and buy supplies at discount stores.
Step 3. Get some extra income by working more hours or a second job.
Step 4. Pay an extra $20 to $25 each month; added up, this should be about an extra payment or two each year.
Step 5. Keep up with vehicle maintenance to preserve resale value and help avoid future repair costs. Did you know following a massive recall, Toyota dropped its average finance charge to a historical low of 1.9 percent in 2010.
What’s in a Car Payment?
Getting a new car is a big deal So make sure you fully understand the monthly payments and other costs that come with it. It will keep you happy even after the new car smell starts to fade. A down payment is what you pay up front in order to secure a loan. The more money put down the less you have to borrow.
- The higher your down payment the lower your monthly payments and less you pay in interest. After subtracting the down payment from the purchase price you are left with the amount you have to borrow: the principal. This will be the amount of money borrow from a lender to make the purchase. Lenders charge interest on what you borrow. Rates are determined by factors such as down payment, length of loan, and credit score.
- The higher the interest the more you pay per month. The length of time you have to pay off your loan will affect your monthly payment and the total cost of the car. Because you pay off short term loans faster, you end up paying less interest on the loan These are one-time fees you pay for the right to the vehicle You have the option of financing these fees along with your loan but you should try to pay separately if possible to reduce the amount of interest you’ll have to pay. So far we just discussed purchase costs but there are other factors to consider.
- Make sure you research the average maintenance costs before purchasing or compare warranties on new cars which will cover many maintenance issues for a time. Some local jurisdictions apply an annual personal property tax to vehicles. Know your state’s rules and budget accordingly. Auto insurance is required in all states but the amount of coverage you need varies. Get some quotes before you buy.
- Make sure you’re aware of the total cost of your car over the life of the loan. Remember even if the monthly payment seems affordable you might be paying more than you think. Keep this in mind as you purchase your next vehicle and you’ll be equipped to make the right choice for you and your budget.