How to get out of a car payment you can’t afford

First things first, decide what end result you are looking for. Do you want to get rid of the payment? Are you looking to lower your payment? Next, you need to determine if you have equity in your car. If you owe less than the car is worth you have equity. If you owe more than the car is worth then you are underwater. You can check the value of your car on websites such as Once you know if you have equity or are underwater you are ready to move forward with selecting the best option to improve your situation.

Don’t voluntarily turn in the car

Surrendering the car to the lender to get out of your payment is a terrible idea. This will hurt your credit just about as bad as the car being repossessed. The lender will most likely auction the car off. If the car is sold for less than what you owe, the lender will come after you for the difference. The car will most likely sell for less than you owe, just in case you’re wondering. You will then be responsible for an item you no longer have. Instead consider the following options.

Sell your car to a dealer

This is probably the easiest way to get out of your car. After knowing the value of your car, you can take your car to dealerships to see how much they will give you for your car. Knowing the value of your car, you can negotiate a better price if they are not willing to give you very much. If you are looking to get a lower car payment you could possibly get more money for your car or a cheaper rate on a car by purchasing it from the same dealer you sell your car to.

Sell your car to a person

This opinion is going to get you the most money for your car. To get the title from the lender you will need to have the total pay off amount for the car. If you are underwater on your car and have to sell it for less than you owe you will need to have cash for the difference of the loan amount and the amount you’re sell the car for. For example, you owe 10k on your car that is worth 8k. You sell your car for 8k then you need to add 2k of your money to pay the loan off so you can get the title and give it to the buyer. The best thing to do in this situation is save up the money for the difference before you sell the car. If you can’t seem to save up the money, you could also possibly get a personal loan from the bank for 2k. Although if you need to buy another car, if you haven’t saved the money you would need to then take out a loan for the new car.

Refinance your loan

If your payments are too high and you’re simply looking to lower your payments, you can refinance your loan. You can refinance your loan with a new lender or possibly your current lender. Make sure you pay attention to your interest rate. The lower the interest rate the lower your payment will be. So ideally you want to get a lower interest rate than your current interest rate. If your interest rate is very high just refinancing for a cheaper rate could save you quite a bit of money. If you haven’t made many extra principle payments on your loan then you should consider refinancing for a longer term. Extending the length of your loan will lower the payment amount although this will increase the total amount you pay over the life of the loan.

Talk to your lender

If you find the above options don’t help much consider talking to your lender. Let them know you’re having a hard time making the payments. They may be willing to work with you to adjust your payment to something you can afford.

Final thoughts

Going forward the best advice I can give you is to avoid purchasing a car if your payment is going to be a sizeable amount. For starters if you can’t put anything don’t, you probably shouldn’t be buying a car just yet. You don’t know what could happen in the future. A $400 payment can fit into your budget today but an unexpected job loss or increase in living expenses could hinder your ability to make your payment. So, when purchasing a car opt to save up and pay cash. Even if that means buying a cheaper or older used car. The money you save from not making a monthly car payment will allow you to sell that car and purchase something nicer. When you go to sell the used car it will have held it’s value much better, thus allowing you to transition that asset into a nicer asset at a lower depreciation cost with far less risk.