Americans Are Struggling to Make Car Payments. Here's What to Do if You're One of Them

Car payments can be a burden. Here's what to do if you're having a hard time making yours.

When you think about your most burdensome bills, your mortgage or rent payments might come to mind. But what about your auto loan? If you own a car, you may be spending a small fortune on those monthly payments.

If you're having trouble keeping up with your car payments, you're in good company. In December, 8.4% of Generation Z, 13.7% of millennials, and 9.4% of Generation X struggled with their car payments, according to recent data from Morning Consult. Here's how you can minimize that burden -- and avoid falling behind.

1. Refinance your auto loan

Just as it's possible to refinance a mortgage, so too can you refinance a car loan. If your credit score has improved a lot since you took out your loan, you may be eligible for a lower interest rate on your auto loan -- one that could lower your monthly payments and make them easier to keep up with. It pays to do some research to find the best deal.

To be clear, you don't have to work with your current lender to refinance a car loan. If another lender makes you a better offer, you should feel free to pursue it.

2. Rework your budget

If refinancing your auto loan isn't an option -- say, you already have a low interest rate or your credit score needs work -- then it may be time to revisit your budget and make cuts. That could mean canceling your cable plan (at least temporarily) and spending less on leisure. Or, it could mean getting a roommate to slash your rent payments.

3. Get a second job

You may already be living a frugal lifestyle that has you spending minimally outside of basic expenses. If that's the case, you may want to consider getting yourself a side hustle to make your car payments easier to keep up with. Not only might a second job help you cover your auto loan payments, but it might also put you in a better position to manage all of your bills and even pad your savings.

If you're not sure what side hustle to get, consider your schedule. If you need flexibility, you'll want to focus on a job you can do at your own pace. You might even look at driving for a ride-sharing service to drum up extra cash. That way, your car can help pay for itself.

Auto loan payments can be a big burden, even if you bought the least expensive car you could find. If you're having difficulty making your payments, see if refinancing your loan makes sense. If not, look into spending changes or an income boost to help yourself stay afloat.

Finally, consider whether you really need to hang onto your car. If you live deep in suburbia, you may need a vehicle to function. But if you live in a walkable area and no longer commute to work (many companies are keeping workers remote long-term at this point), you may be in a position to sell your car and avoid those payments in the first place.