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Buying a car is a significant financial decision that will affect your budget for years to come. Therefore, you should be well-informed and prepared before visiting any car dealerships.

Let’s talk about a few steps you need to take before shopping for a car. After crossing off these items from your to-do list, you’ll be ready to save money, reduce stress, and feel confident the moment you visit an auto dealership lot.

1. Check Your Credit Score

Credit scores play a major role in the car-buying process. It’s a metric that lenders use to determine a person’s ability to manage debt. When financing a vehicle, a person’s credit score determines how much they can borrow and the interest rate they qualify for.

Higher credit scores give borrowers access to more advantageous terms, such as lower interest rates. Differences in this score can mean paying hundreds (or even thousands) more over the life of the loan.

Before you start shopping:

• Request and review your credit report for accuracy
• Address any errors you find
• Understand where your score stands

If you need to improve your credit score, consider delaying your car shopping journey for a few months. Take measures to improve that rating, like paying down outstanding balances or making consistent, on-time payments. Putting in the work now can save you some money down the road.

2. Set a Realistic Budget

The price of a car doesn’t stop at what the sticker says in the dealership lot. While the price can be a big factor in your decision, there are also other costs you’ll need to consider.

Much like getting a home loan, there are also other expenses you’ll need to consider after closing on a deal.

Revisit your budget and make sure you’re accounting for these additional variables:

• Fuel costs
• Repair and maintenance
• Insurance premiums
• Registration and taxes

The items listed above are additional costs associated with owning a vehicle and are separate from your monthly car loan payment. NerdWallet recommends that your total car costs should not exceed 20% of your monthly take-home pay, including fuel, insurance, maintenance, and the monthly loan payment.

Use this step as a quick reality check. Your car budget shouldn’t focus exclusively on the loan. Even if you’re approved for a certain loan amount, it doesn’t mean you’re required to spend that much on just the vehicle.

3. Get Pre-Approved for an Auto Loan

One of the best ways to be prepared for your car-shopping experience is to get pre-approved for an auto loan. A pre-approved auto loan is a written offer from a lender stating how much they are willing to lend for a car purchase. The pre-approval includes the interest rate and terms.

Why is getting pre-approved beneficial to you? There are several reasons:

First, it will show your interest rate and loan terms upfront. Now that you have a more concrete idea of how much you can borrow, you can shop around and see if other dealerships’ options are as competitive. This gives you some leverage in the purchasing process.

Next, pre-approval empowers you to make informed adjustments to your car budget. This means you have a clearer picture of your monthly payments. Also, since you will know how much you’re allowed to borrow, you give yourself room to explore vehicles at different price points. Having a price range in mind takes the surprises out of any add-ons or packages you may want.

Pre-approval is a proactive step that allows you to approach car shopping more confidently. Having a loan in place will better prepare you to shop around and negotiate with dealerships on a better footing.

4. Compare Loan Terms and Not Just Rates

Having a low interest rate on your car loan is important, but it’s one part of a larger picture. It’s equally important to consider the length of the loan, too.

Lengths of time can make a difference in your monthly payments, especially when talking in terms of years.

Longer loan terms may lower your monthly payment, but they can increase the total interest you pay. In some cases, you could also risk owing more than the vehicle is worth for a longer period.

You can use an auto loan calculator to compare how much interest you will pay if you choose certain terms and rates. Be sure to compare:

• Loan length
• Total interest paid over the life of the loan
• Monthly payment amounts
• Any fees or prepayment penalties

By comparing rates, you’ll be better equipped to plan your budget accordingly. Predictable costs and payment schedules allow you to make informed decisions and keep your finances manageable.

Start Your Car Search With Confidence

Buying a car shouldn’t be overwhelming. When you are prepared and have a clear direction on how you want to shop for a car, you can stay firmly in control of the purchasing process.

Having the right tools on hand (your credit score, a pre-approved auto loan, and an informed budget) will empower you to enter any dealership confidently. Taking these steps will give you a measured approach to car shopping that allows you to pursue your financial goals.

When you’re ready to take the next step, First Florida Credit Union is here for you. Check out our auto loans and explore your financing options.