To pay off a 6-year car loan in 3 years, significantly increase your monthly payments by rounding up, making extra principal-only payments, or paying half your payment bi-weekly (effectively making an extra payment yearly), and use windfalls (bonuses, tax refunds) for large lump sums; consider refinancing to a shorter term or lower rate if your credit is good, and eliminate add-ons like GAP insurance or warranties if you financed them, applying any refunds to the principal.
You'll save money.
Unless your loan has precomputed interest (more on that below), extra principal payments can help reduce the total amount of interest you'll pay.
The 50/30/20 rule is a simple budget guideline: 50% of your after-tax income for needs (like housing, groceries, and car payments/expenses), 30% for wants (dining out, entertainment), and 20% for savings and debt repayment. For a car payment, this means your total monthly car expenses (loan, insurance, gas, maintenance) should ideally fit within the 50% "Needs" category, with some experts suggesting car costs shouldn't exceed 10-15% of your income overall, making a modest car a "need" and luxury vehicles a "want".
Dave Ramsey's core car rules emphasize paying cash, avoiding new cars (unless you're a millionaire), keeping your total vehicle value under half your annual income, and using a strict budget, often suggesting the 20/4/10 rule (20% down, 4-year loan, 10% total car expenses) as a guideline if financing, but preferring no debt at all to avoid depreciating assets trapping you. He stresses buying reliable, used vehicles to prevent debt and build wealth.
Input a monthly payment amount
Take-home pay is the amount you make each month after taxes, so if you bring home $3,000 monthly after taxes are deducted, it's likely you can comfortably afford a $300 car payment.
The 20/3/8 rule is a car-buying guideline suggesting you put 20% down, finance for 3 years or less, and keep your total monthly car expenses to 8% or less of your gross income, helping to ensure you buy reliable transportation without overspending and can still invest in other goals like retirement. It's a tool to avoid being "underwater" on your loan (owing more than the car's worth) and to prioritize financial health over luxury vehicles.
You should consider paying off your car loan early if you have an emergency fund, no high-interest debt, your loan has simple interest (not precomputed), and you'd benefit from freeing up monthly cash or lowering your debt-to-income (DTI) ratio, but always check for prepayment penalties first. It's a good move to save on interest and gain ownership sooner, but prioritize high-interest debts like credit cards if they exist.
Paying Twice A Month: Making two payments that are more than your monthly bill will not only pay off the principal faster but will reduce accrued interest.
Dave Ramsey's core car rules emphasize paying cash, avoiding new cars (unless you're a millionaire), keeping your total vehicle value under half your annual income, and using a strict budget, often suggesting the 20/4/10 rule (20% down, 4-year loan, 10% total car expenses) as a guideline if financing, but preferring no debt at all to avoid depreciating assets trapping you. He stresses buying reliable, used vehicles to prevent debt and build wealth.
"I'm Going to Pay Cash!"
If they know you have a specific budget, they also know they won't be able to move you up to a more expensive, profitable model. So if the salesperson asks about financing, just say you're undecided.
In the short term, paying off your car loan early will impact your credit scores — usually dropping them by a few points. The short-term effects only last so long, and over the long term, your credit scores may rise because you've reduced the amount of debt you owe.
A car loan settlement involves negotiating with the auto lender to pay less than the full amount due. If the lender agrees to a settlement, you make a lump sum payment for the agreed-upon amount by the agreed-upon date.
Quick Answer. In Q3 2025, the average car payment for a new car was $748, and the average payment for a used car was $532. However, monthly payments can vary significantly based on many factors, including the loan amount, loan term, borrower credit history and more.
Leasing a car is much cheaper than buying it outright, because you're only paying a percentage of the total price. You won't have to worry about fetching a good price or finding a buyer for it when you're done, as the dealership will take it back from you.
To be clear, extra car payments may not automatically go to the loan principal. They'll most likely be applied to interest first unless you specify how to apply them with your lender.