Making auto payments on time should be a high priority in your life. It should rank right alongside making timely house payments. Your transportation is how you get to your employment, generate a paycheck, and bring your food home.
The first advice usually offered to avoid late auto payments is to setup auto pay. This can work, but make sure you have ample funds.
If you pay using a credit card, make sure the available credit is far more than your car payment. If you use a checking or savings account, make sure the balance far exceeds the car payment as well. If you depend on direct deposit to maintain your bank account balance, this can be problematic. If the date for a direct deposit falls on a Saturday, those funds may not be credited to your bank account until Tuesday. You may incur a late fee from the auto lender and possibly an overdraft fee from your bank. These are expensive and can add up.
Relying on auto pay removes control of your car payment out of your hands to a degree.
Create visual reminders for yourself. Mark your calendar.
You may need to make some life changes that will end up being not too painful.
A good first step is to review unnecessary expenditures. Are you subscribing to a newsletter you never read but still pay a monthly fee for? Cancel it. Do you subscribe to home movie services that you don’t watch? Cancel it. Do you belong to a gym but rarely go? Cancel that as well.
People paying off multiple cars can consider doing without at least one of them. Honestly determine how many cars you really need.
Consider getting a second job, even if for a short period of a few months. Be willing to perform yard work in your neighborhood. There are part time evening jobs available constantly. Those companies always need help.
Keep track of how many times you eat fast food each month. Bring home fast food receipts and throw them in a shoe box. At the end of the month when you count, if you have gone to fast food ten times, and spend $6.50 each trip, that’s a whopping $65 spent on convenience. Turn off the TV and read about finances. Read about budgeting. Read about paying off house loans and car loans early.
If you are considering purchasing a new car, do your preparation at home before you go to a dealership. Check your credit score. Correct any inaccuracies. Set a dollar amount in your mind and don’t allow a dealer to upsell.
Just as importantly, don’t talk yourself into a higher monthly payment, because you “just love this car.” Be firm with yourself.
A rule of thumb is to limit a monthly car payment to 10 percent of take-home pay. Avoid 72-month loans and aim for 60-month loans.
Another possibility is to refinance your car at lower payments, especially if your credit score has improved.
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