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Car PaymentDeb is paying a lot for her car. And like many Americans, she will continue to pay for many years to come.

“I am trying to reduce my car loan payments,”she wrote in response to a recent Credit.com story. “Which is 270 per month for the next five years. Is there a good way to do this?”

It’s a bind familiar to many Americans. According to a recent report on car sales by Experian, the national credit bureau, the average length of a car loan is now more than five years. That means the typical consumer will spend 64 months paying off their car, and some will stretch payments out to six or even seven years.

What’s more, Deb’s car is actually more affordable than most. The average new car cost $25,714 in the second quarter of 2012, an increase of $474 over the same quarter last year, according to Experian. Used car prices increased $470 during the same period, to an average of $17,433.

Crunching the Numbers

To pay those larger loans off, the average new car buyer faces payments of $452 a month, Experian found, and the average used car buyer spends $351 a month. At least buyers are benefiting from relatively low interest rates. The average rate for new cars dropped from almost 5 percent to just over 4.5 percent during the second quarter of 2012. (Average interest on used cars held nearly steady, at a hair above 9 percent.)

For people in Deb’s position, however, lower rates aren’t helping much. And there may be little she can do about it, according to Credit.com’s credit experts. She may be able to refinance her loan, but she faces potential obstacles.

“Depending on her credit score and the age and quality of the car, she may be able to refinance the loan, or she may not,” says Barry Paperno, Credit.com’s credit scoring expert.

How It Will Impact Your Credit

If Deb does try to refinance, timing is important. Each request for new credit is registered on a consumer’s credit report, and causes their score to drop a few points. If the consumer makes many requests for a car loan, therefore, it could result in many small dings, resulting in a substantial credit score hit.

An exception to that rule happens when the consumer performs all of her credit applications for a particular type of loan within the same two-week period, explains Gerri Detweiler, Credit.com’s consumer credit expert. If Deb applies for twelve car loans stretched out over twelve months, that will count as twelve separate hits to her credit score. If she makes the same 12 applications within a single two-week period, however, they all get clumped together as a single “credit pull,” and together count for only one small hit to her score. The same clustering rule applies to mortgages, student loans, and other types of debt.

“She should just be sure to do all her hard-pull inquiries within two weeks, because then it all counts as one inquiry,” Detweiler says.

If Deb’s car is old, however, or if her credit is poor, she may not qualify for a new loan. In that case, her options are limited significantly, Paperno and Detweiler say.

“Can she sell the car? Can she get a second job?” Detweiler says. “Unfortunately, there’s not a lot of easy solutions when your car payments are too high.”

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