If you, like most of us, need to make your income go further, it’s helpful to start by looking critically at your monthly budget, starting with your biggest expenditures. Transportation costs are the second biggest category of expenses for the average American, second only to the cost of housing.

These transportation costs, of course, include items like gasoline and repairs, but the largest portion of our transportation expenses by far is the cost to purchase our vehicles.

Refinance to lower your car payment with a lower interest rate

If you have an existing car loan, the quickest way to lower your car payments is to refinance the loan to a better one. On average, you can reduce your interest rate by 2.4%. The interest rate you are paying, expressed as the Annual Percentage Rate or APR, is another way of describing how much a loan costs you. Why don’t more of us look into refinancing our car loans? The answer is hiding in plain sight. Most of us do not know that we can refinance our car loans.

Refinance to lower your car payment by extending your term

For car loan terms, a shorter loan term means less interest paid over the life of a loan. However, lengthening your loan term can reduce your car payment every month, sometimes significantly. The car loan market is massive, with over one trillion dollars in loans outstanding. That means every kind of lender and investor is involved in the auto loan market. As a result, the variety of car loan terms available may surprise you. Loan terms extend all the way out to 84 months and beyond at the extreme.

Here’s why your car loan payment is too high to begin with

Here’s the problem: you probably didn’t shop for a car loan. Over 70% of us get our car loans when we’re “signing the paperwork” in the back office of the car dealership. While this is convenient, it is a terrible idea. Why? Because the car dealer probably does not have your best interest in mind when arranging a loan for you.

The problem is getting worse. Car dealership profitability has shifted dramatically over the past 10 years. Car dealers used to make most of their money the way you would expect. They buy a car from the Ford or Toyota factory, and sell that car to you for a higher price. Simple and old fashioned. But over the last 10 years, the internet has created much greater price competition among dealers for your business. The result is that we as consumers do much better and car dealers earn less when they sell you a car. That’s good for you.