Riding on Empty: Must-Know Steps for Surviving Unaffordable Car Payments

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Do you ever feel like the high costs of car payments are bleeding your wallet dry?

You’re not alone; more and more people across the globe are struggling to manage their monthly car payments on a fixed budget.

With gas prices skyrocketing, insurance rates continuing to rise, and hefty interest charges jacking up vehicle costs, even those who thought they could handle it in the beginning find themselves stuck in an unbearable financial situation.

But don’t worry, there is hope!

Here are some interesting ways to get rid of your car payment.

#1. Involuntary Repossession

This is the classic vehicle repossession that you know and should be used as an absolute last resort.

You stop making payments and eventually, the repo team comes and takes your car.

The benefit to you is you save money for a few months because you stopped making payments.

The drawback is the harassing phones from collections.

The other major downside is your credit gets ruined in the process.

This will make it close to impossible to get another car loan any time soon, as the repossession will stay on your credit report for up to seven years.

You might even struggle getting other forms of credit.

#2. Voluntary Repossession

With voluntary surrender, you continue to make payments to the lender, but call up the financing company and tell them you don’t want the vehicle any longer.

If they agree to voluntary repossession, they will take the financed vehicle and sell it.

You will owe the difference between the remaining balance on your car loan the price they received.

For example, if your car loan is $30,000 and the financed car sold for $20,000, you still owe $10,000 to the lender.

Also, this is reported on your credit reports, so your credit scores will drop, but not as much as if you choose an involuntary repo.

It’s important to note that you will almost always still owe on the car loan because the finance company will sell the car at an auction, which typically gets a low price.

#3. Talk To Your Lender

Before you choose voluntary repossession of your car, consider first calling the finance company.

Tell them you are struggling financially and see what they will do.

Sometimes the lender will allow you to miss a few monthly payments and then add them back on at the end of the loan.

Doing so will not hurt your credit history.

The key here is to not agree to the first option they suggest.

They most likely have better options, but if you choose for the first thing they offer, you will never know.

Remember, finance companies don’t want to repo your car. And they don’t want to go through a collection agency.

They want the loan repaid. So it is in their best interest to work with you.

#4. Talk To The Dealer

Sometimes the finance company won’t help or offer a solution that works for you.

When this happens, reach out to the dealer where you bought the car.

They might have options for you, including reaching out to the finance company on your behalf, assuming you financed through the dealer.

In some cases, if the vehicle you own is in high demand, they might offer your a higher than normal amount, which could pay off the car loan debt in full.

#5. Transfer Payments

An often overlooked option is transferring payments to someone else.

Here, you assign the car loan payments to your parents or a relative and they make the monthly payment.

To make this work, you make an repayment plan with them on how you will repay them along with the loan terms.

The benefits here are substantial.

You keep the car, keep your credit, and work out better loan terms.

The downside is it could ruin your relationship, especially if you skip out on repaying and they then take the car from you.

#6. Refinance Your Loan

There are many companies out there that will refinance auto loans.

In a high rate environment however, it may be challenging to get a low rate, which would lower your car payments.

On the other hand, if you paid down a significant amount of your auto loan, refinancing could lower your payment, even with the same interest rate.

#7. Sell Your Car

Selling your car allows you to get out from under the loan.

The problem is most times you will get less for the car than what you owe, meaning you will need to come up with the difference to repay the remaining loan balance when you sign the paperwork.

For example, if you owe $25,000 and sell for $18,000, you need to have $7,000 when you transfer the title to the new owner.

To ensure you get the most money, look at the value of your vehicle using Kelley Blue Book and other auto guides.

Some people consider trading in the vehicle to the dealer when they buy another car.

But the same thing happens here, only this time the amount you owe is added to your new loan.

This puts your upside down almost immediately in the new car, so it is not recommended.

#8. Take Out A Personal Loan

Instead of selling, consider taking out a personal loan.

You might be able to get a lower interest rate than you currently pay, and you could extend the payments out longer, making the monthly amount you owe more manageable.

The downside is if you have to extend the term too far, and you end up paying for a car you no longer own.

#9. Find Additional Income

Instead of getting rid of the car, find a way to make some extra cash on the side to put towards you car payments.

If your payment is $600 a month and you make $400 mowing lawns, you only have to pay $200 a month now.

While you might not want to use your free time to make some extra cash, remember it is only temporary until the loan is repaid.

Plus, you get to keep the car and improve your credit history.

#10. Combining Options

There is nothing stopping you from getting creative when it comes to solving this problem.

Maybe you know you could sell your car for $20,000 and you currently owe $25,000.

Instead of trying to pay off the loan, work a side hustle to help you pay down the $5K as quickly as possible.

Then sell the car and pay off the loan in full.

If you still need a car, go buy a reliable beater car for $5K and have a small car payment.

Or, work the side hustle to get $10K. Use half to pay down the loan and sell the car and use the other $5K to buy the replacement car.

Another scenario could be to borrow $5K from family or from zero percent credit card balance transfer.

Use the cash to pay down the loan and then sell.

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