Whether you’re buying a brand-new vehicle or a used one, you’ll probably finance part of the cost with an auto loan. While borrowing money from a lender is an excellent way to make car costs affordable, you could run into trouble if your monthly loan payment is too high. If you want lower monthly payments, you can start by making a

good down payment

or opting for a longer loan term.

For more information on how much money you should spend on your monthly car payment, turn to

Jerry

, the

trustworthy super app

that simplifies

car insurance

shopping. In this guide, we’ll go over how to know if your car payment is too high, and what you can do to lower it.

Find out if you can reduce your monthly car payments in minutes

* checking your rate won’t affect your credit score

Check your rate

* checking your rate won’t affect your credit score

When is a car payment too high?

Using a loan to pay your car off over time should make your life easier, not harder! That’s why it’s so important to make sure you can afford your monthly car payment without struggling.

The amount that’s affordable to one car buyer might not be to another, but aiming for a loan payment that’s 15% of your monthly income or less will put you in a pretty good spot. This means that if you make $3,500 per month, you should try to keep your car payment at $525 or less.

Of course, some car buyers might be in a financial situation where they can afford a higher amount—but most experts agree that your loan payment should never exceed 30% of your monthly take-home pay, no matter your budget or financial status.

What factors affect your car payment?

Your lender calculates your new car loan by taking the amount of money you borrowed and dividing it over the number of months in your loan term. Of course, in reality, things are a little more complicated than that. Your down payment, loan amount, and credit score all play a role in determining your monthly payment.

Down payment

When you put a down payment on a car, you pay a percentage of the total cost directly to the dealership at the time of purchase. This means that the more money you put down, the less money you’ll have to borrow—and the lower your monthly payments will be.

Most car dealerships expect a down payment of around 20%. But as long as you can afford it, putting 30%, 40%, or 50% down is even better. In fact, you should aim to pay as much as you can afford without hurting your finances.

MORE:

What is a good down payment for a car?

Loan amount

The amount of money you need to borrow is determined by several factors, including your down payment amount, the vehicle price, and whether or not you

trade in your car

. By borrowing less money in the first place, you’re more likely to have a lower car payment.

If you want to reduce your loan amount, you might consider financing a cheaper used vehicle instead of a brand new car, or trading in your car to the dealership. Trading in your old car could cut thousands off your final purchase price—especially if your car is in good condition and has low mileage.

Credit score

When you pay back an auto loan, you’ll be charged for its principal (that’s the amount you borrowed) plus an interest rate and other fees. A loan’s interest rate is basically the cost of borrowing money, and it’s usually determined by your credit score. If you want to check your credit score, you can look it up online by visiting the Experian, Equifax, or TransUnion website.

It’s not too difficult to get approved for a car loan, so even a fair credit score in the mid-600s puts you in a position for a reasonable interest rate. But if you have a good credit score of about 715 or higher, your lender is likely to consider you low-risk and offer a lower interest rate.

In general, the better your credit score is, the less it costs to take out a car loan.

MORE: What is a good credit score for a car loan?

How to keep your monthly car payments low

Once you’ve figured out which car you want to buy and settled on a down payment amount, there are a few methods you can use to get an affordable auto loan. Comparing loan terms, negotiating for a lower price, and sticking to your budget can all help ensure you get a cheaper monthly payment.

Explore your auto loan financing options

Car shopping can be stressful, and many car buyers simply agree to the loan terms presented by the dealership. But by taking the time to shop around, you have the option of working with a lender who offers the best loan terms for your budget. A car loan from a credit union is often the most affordable option.

If you’ve spoken to multiple lenders, looked at your average monthly car payment and average interest rate, but still can’t find a loan with payments you can afford, consider a longer loan. Most auto loans last 36 or 60 months, but extending your loan term to 72 or 84 months can reduce your monthly payments. That said, keep in mind that while a longer loan lowers your monthly bill, you’ll pay more in total interest.

MORE:

Should you get a 72-month car loan?

Negotiate with the dealer

Another way to reduce your loan payments is by borrowing less money—and you can try to accomplish that by paying less for your new car purchase. Remember, car prices aren’t set in stone, so you might be able to get a few thousand dollars off your car simply by talking to your dealership about a lower price.

Negotiating can be stressful of course, but you can ease the process by doing your research and practicing your talking points.

MORE: How to negotiate with a car salesperson

Set a budget (and stick to it!)

Before you start the car-buying process, take the time to figure out exactly what you can afford. If you’re not sure where to start, an online loan calculator or personal finance tools such as budgeting software can help. Once you set a budget, don’t agree to any terms that go over the numbers you had in mind—and be willing to walk away if you have to.

You’re better off with a less expensive car if it means you get better loan terms and a lower monthly payment.

Key Takeaway Comparing loan terms from different lenders, negotiating for a cheaper price, and sticking to a budget are good ways to make sure you can afford your monthly loan payments.

How to find cheap car insurance for your new car

Now that you’ve done all the hard work of shopping for a new car, negotiating a price, and finding affordable loan terms, buying

car insurance

might be the last thing you want to think about. But with a little help from

Jerry

, you can find cheap coverage in less than a minute.

First, download the app and answer a few questions about yourself and your vehicle. Then, sit back while Jerry scans coverage options and rates from more than 55 of the nation’s top-rated insurance companies and generates a customized list of cheap quotes that match your profile. Finally, select your preferred policy and let Jerry handle all the phone calls and paperwork for you.

No long forms, no calling around, no hard work—just savings. The average Jerry user saves over $800 a year on their car insurance.

“
Jerry
got me out of a bind! I bought a new car, and my existing insurance raised my prices and didn’t budge. Thankfully, Jerry got me an affordable rate without me waiting for phone calls all day.” —Felicia M.

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