Money Management

One simple financial move can help you get a lower monthly payment on an auto loan. Discover what it is and how much of a difference it can make. 

As interest rates and car prices have gone up, so have car payments. The average monthly payment on a new car loan was $716 in the fourth quarter of 2022, according to Experian. Even on used car loans, the average monthly payment was $526. And those are just the averages. Some consumers with expensive cars pay more than $1,000 per month.

The good news is that many of the factors that determine your car payment are in your control. In fact, there’s one move you can make that could help you save big, no matter what kind of car you buy and how much you borrow.

Higher credit score, lower car payment

Your credit score plays a significant role in your car payment. Consumers in the super prime score range (781 to 850) pay an average of $683 per month for new car loans and $505 per month for used car loans. That’s savings of $33 and $21 per month, respectively, compared to the overall averages.

Here’s a full breakdown of car payments by credit score:

Car buyers with the highest credit scores pay the least for both new and used cars. The difference in averages is as high as $70, between super prime and nonprime new car buyers.

One oddity you may have noticed is that consumers with the lowest credit scores don’t have the highest average car payments. The most likely explanation is that those consumers buy cheaper cars and get smaller auto loans.

Regardless, auto loan rates depend largely on your credit score. All other things being equal, a better credit score will qualify you for a lower interest rate and a lower monthly payment.

How to improve your credit score

A high credit score has lots of personal finance benefits, so it’s always a good goal. If you want to raise your credit score before you buy a car, there are a couple of things to do.

The fastest way to boost your credit score is to lower your credit utilization ratio. Your credit utilization is your credit card balances divided by your credit limits. The lower this ratio is, the better. It’s widely recommended to keep credit utilization under 30%, because any higher can hurt your credit.

The good news is that your credit utilization is updated monthly. If you go from, say, 80% utilization to 20%, that can drastically improve your credit within a month. Here are a few ways to lower credit utilization:

Pay down your credit card balances. If you have any way to pay down your cards, such as money you can use from your savings account, it’s well worth it.Pay your credit cards weekly. Credit utilization is reported once a month. If you make weekly credit card payments, it can keep your balances lower when your utilization gets reported.Request a credit limit increase. Having higher credit limits will lower your credit utilization. Ask all your card issuers for a credit limit increase. Many let you do this online, but you can also call in and do it by phone.Open a new credit card. If you’re approved, the new card will add to your credit limits. For the best results, open a balance transfer card that you can use to refinance your credit card debt.

Also, make sure to pay your credit cards on time every month. Payment history is the largest factor in your credit score. Every on-time payment is good for your credit score, and late payments can have a huge negative impact.

Saving on your car payment

An expensive car payment is something to avoid whenever possible. It takes up a large portion of your income, which impacts how much you can save and invest.

Fortunately, there are several ways to get a lower car payment. The price of the car you buy is what matters most, so don’t stretch yourself too thin for a car you can’t afford. A large down payment also helps, which is a good incentive to save as much as you can before you buy. And as the data shows, it helps to have a high credit score.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

 Read More 

Employees everywhere are returning to the office after the pandemic. Find out how to do so without emptying your wallet. 

While many workers appreciated the opportunity to work from home during the pandemic, many employers feel differently. Roughly half are pushing for a full-time return to the office, in spite of employee preferences. This loss of flexibility is frustrating enough, but it’s compounded by the additional expenses commuting to work brings.

After years of remaining at home, many workers are now more aware of the costs associated with working out of an office — everything from gas to a new office wardrobe. But unless you’re willing to switch jobs, you may have no choice but to pay for them. They don’t have to drain your bank account, though. Try these five tips to help you save.

1. Avoid unnecessary purchases

You don’t need business attire when working remotely, but few offices will permit you to show up in sweatpants. You might be able to get by with dusting off your old work clothes. But this may not work if you’ve slimmed down or added a few inches to your waistline since the pandemic began.

In that case, a new work wardrobe could be a necessity, but you should still think carefully about what you buy. Start with a few basics that are pretty versatile. You can always add more over time as you get the extra cash. And if you aren’t sure whether you should buy something, sit on it for a few days before making that call.

2. Shop sales and secondhand stores

You can also save on business attire by watching out for sales and coupons. If you don’t want to miss anything, consider subscribing to your favorite stores’ mailing list. Many companies send out exclusive offers this way.

You might also want to explore secondhand stores in your area or online. These clothes are often a fraction of the price of new clothing, and most are in pretty good condition.

3. Make food and coffee at home

Going out for lunch or stopping at your favorite cafe for a coffee on the way to work can add up quickly, especially if you do this every day. You can save yourself quite a bit of money by making your meals and coffee at home before you head to work.

If you find this to be too time-consuming, look for ways to streamline the process. You can prepare all your lunches for the week on the weekend or set your coffee pot to brew automatically at a certain time each day.

4. Try carpooling or using public transit

Carpooling with other coworkers who live nearby can reduce how much you spend on gas while also being kind to the environment. But you’ll have to communicate with each other about your plans, especially if you need to run errands before or after work.

Public transit is another affordable option if you live in a city where this is a possibility. The amount you’ll spend on a bus or subway pass will likely be a lot less than what you’d pay to drive back and forth to the office each day in your own car.

5. Seek out more flexible employment options

If the tips above don’t do enough for you and you’re unhappy with your current job, it may be time to search for a new one. Remote positions may not be as plentiful as they were at the height of the pandemic, but there are still a lot of opportunities out there.

When deciding whether a remote position is right for you, think about how comfortable you are working from home and how making the switch will affect your finances. You may save on some of the above costs related to commuting, but if it means settling for a lower salary or fewer job perks, it might not be the best move for you in the long run.

If you can’t find a new position that suits you right now, keep an eye out for new opportunities in the future. And see if you can brainstorm any additional ways to save on your work-related costs, other than the tips mentioned above.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 Read More