5 ways to get out of auto loan debt

Buying a car has never been more expensive, with the average cost for a new automobile exceeding $50,000.

Thanks to a combination of factors, including inflation and higher manufacturing costs, buyers are being saddled with costlier financing terms. The share of new-car buyers paying $1,000 or more a month in auto loans rose to a record 20.3% in 2026, according to automotive review site Edmunds.

Are car payments breaking your budget? We've got five options to help you out.

If you realize you can't make your auto loan payments, call your lender. It's expensive to repossess and resell a car, so they may be willing to help you find another solution. Availability and eligibility requirements vary by lender.

Adjust the payment date. Sometimes, simply changing the payment due date helps make the loan more affordable. For example, if all of your bills are due at the end of the month and you're paid biweekly, moving some payments to the middle of the month can provide relief and make for easier budgeting.

Get a payment extension. A payment extension lets you defer a payment until a later date. This can be helpful when you're experiencing short-term financial issues — for instance, an unexpected large expense your savings can't cover.

Modify your loan. If your financial situation has changed permanently, some lenders might agree to loan modification. This may involve changes to your loan term or interest rate to make monthly payments more manageable.

Refinancing your auto loan replaces your existing financing with a new loan, ideally one with a lower interest rate or a longer repayment term. Extending your loan term usually means paying more in interest overall, but that's better than falling behind on payments.

• Read more: Best lenders for auto loan refinancing

Check with your existing lender about refinancing, but reach out to three or four other providers for comparison. Auto marketplace MyAutoLoan can serve up to four offers without a hard credit check.

In addition to traditional refinancing, Autopay offers cash-back refinancing, which lets you borrow additional money against your car's equity.

If modifying or refinancing your loan would still leave you with car payments you can't afford, selling the car or trading it in may be your best option, whether you choose to work with a dealership, a chain like Carmax or sell it privately

Get an estimate of your car's current value by checking sites like Kelley Blue Book or Edmunds. If it's worth less than what you owe the lender, it's considered an underwater or upside-down loan and you'll have to come up with the difference.

For example, if your car is valued at $10,000 but you still owe $12,000 to the bank, you'll need to find an extra $2,000 to pay off the loan if you want to sell. 

See if debt relief can help you

Settling a debt means the lender agrees to accept less than you originally agreed to.

You'd have to make a lump sum payment by an agreed-upon date and it's still considered a negative item on your credit report, according to Experian, but it's not as bad as if you defaulted outright.

A settled account will stay on your credit report for up to seven years from the date of settlement. In addition, the forgiven debt may be considered income by the IRS.

If you can't negotiate, you might want to voluntarily surrender the vehicle to the lender. They'll sell the car to recover the debt but if it sells for less than the balance, you'll be responsible for the difference.

Again, voluntary surrender is a negative item on your credit report, but it's less damaging than repossession.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice to help them make informed financial decisions. Every auto loan guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of car loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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