If your car payment is getting harder to make, you’re not alone.
New car prices have soared in recent years, with the average new vehicle now selling for nearly $50,000. Add in rising gas and insurance costs, and it is no surprise that recent Fitch Ratings data show Americans with lower credit scores are having a harder time keeping up. Nearly 7% were at least 60 days late on their car payments.
The first step in getting back on track is acknowledging the problem early. That’s according to Thomas Nitzsche with the nonprofit Money Management International.
“A lot of people are very resistant to talk to their creditors because they have fear or shame around, what’s going to happen next,” Nizsche said.
And the longer people wait, the more those missed payments can add up.
Consumer Reports’ Keith Barry says the sooner you reach out to your lender about your current financial situation, the better.
“Lenders usually have options available,” Keith Barry with Consumer Reports said. “They might offer to move your payment due date, be able to set up a hardship plan, or deferred the payment. Especially, if you have a good payment history, your lender might be more willing to work with you to avoid delinquency or your car getting repossessed.”
Before agreeing to a plan, ask how it could affect your credit, late fees, and interest. Then get the agreement in writing.
Another option may be refinancing your car loan.
“Check with banks, credit unions, and online lenders, because you might be able to get a lower interest rate that could save you money,” Barry said. “But just be careful. If you make the loan term longer, it could cost you more in the long run.”
If you lease your car, getting out of the contract can be difficult. But a lease transfer may be an option. Sites like Swapalease can help connect you with someone willing to take over the remaining payments.
“Just make sure your leasing company allows it, and ask about fees or whether you could still be responsible if the new driver stops paying,” said Barry.
Bottom line: The sooner you deal with a car payment problem, the more room you may have to work things out.
Consumer Reports says to be careful with companies that promise to lower your car payment for an upfront fee. Some scammers may even tell you to send payments to them instead of your lender. That money may never go toward your loan, leaving you out of money and even further behind on your payments.