Steps to take when figuring out how much you can afford
- Know your credit history.
- Determine how much you can afford to spend on monthly payments.
- Set a reasonable budget.
- Get pre-approved for a your auto loan before picking out a car at the dealership.
Research
Do your research before deciding on a car. Shop around, test drive, and inspect the cars you like. When it comes to prices, look at the total payment of the car, not just the monthly payments. Try to negotiate the price of the car. Do not feel pressure to spend more than you can afford.
Pay for the car
When you find a car you like, shop around for the best financing deal. Also consider borrowing from a licensed lender, bank, or credit union. Getting pre-approved for a car loan before you head to a dealership gives you confidence you are shopping within your price range.
Understand what you are signing
Ask questions as you go through the sale contract. Understand the finance terms - such as interest rate, APR, finance charges, total payments, late fees, and insurance. Review your monthly payments, loan term, and late fees.
Keep in mind that you are not obligated to buy add on products like, GAP insurance, service plans, or extended warranties. Find out if your car has a starter interrupter device. Your lender may use this to prevent the vehicle from starting if your do not follow your payment agreement.