You’ve dreamed about it hundreds of times. That new car smell that just can’t be replicated, as you’re driving down the highway in your brand new ride. Before heading to the dealer and buying a car your wallet wouldn’t appreciate, do some quick and easy homework. With so many options, financing a vehicle may seem daunting. We hope these tips help you make the most informed decision for you and your budget.

Not sure where to start?

Once you’ve narrowed it down to a few vehicle styles you’re interested in, follow these steps to help make the financing and buying process go smoothly and stress-free.


Know what you can afford

  • Start off by assessing your current financial situation. Review your monthly take-home income and subtract all anticipated and reoccurring expenses, like rent/mortgage, utilities, groceries, and other loan payments.
  • Adding a car payment to your monthly budget shouldn’t break your budget and leave you without money for things like groceries or force you to dig into savings. If your finances seem a little too tight after calculating these expenses, consider looking for a cheaper vehicle so your monthly payment is less of a burden.
  • When financing a vehicle, it may be tempting to look at the lowest monthly payment, which is sometimes the longest-term loan. Instead of this, look for the shortest term you can afford without breaking your budget. The shorter the time you’re in debt, the less interest you’ll pay.
  • Once you’ve got a solid idea of what you can afford, try using a car loan calculator to verify the monthly payment you’re estimating you can afford is realistic to the vehicles you’re looking at.


Review your credit report and your credit score

  • Each year, you can receive three copies of your credit report, one from each of the major credit reporting agencies: Experian®, Equifax® and Transunion®. You can do this by going to Annual Credit
  • If you identify an error, now is the time to contact your lender or the credit-reporting agency and have this remedied. It may save you hundreds, even thousands, when you finance your vehicle.
  • Assess whether you’re in good-standing on all your loan commitments and credit cards. If not, it may be more difficult to obtain financing at a low interest rate, which will result in a higher monthly payment. If you’re behind on your credit obligations, take the steps now to get in good shape before purchasing a car.


Get pre-approved & negotiate

  • Compare financing options at your financial institution and at dealerships to be sure you’re getting the best deal. This usually means you’ll be shopping around and applying for loans to see what kind of deal you can get. Bankrate.
    advises that you do all loan applications within a two-week period so they count as one in individual inquiry on your credit report.
  • Navy Federal offers pre-approval for auto loans, so you can walk into a dealership already knowing the maximum you can spend, and what the interest rate and terms are. It takes the stress out of dealing with a dealership’s finance department and puts you in the driver’s seat when negotiating.


Take a look at the big picture

  • Consider the total price of the vehicle, including the purchase price and the interest you’ll pay over the course of repayment. Some auto lenders, like Navy Federal, allow you to build in sales tax, and the cost of titling and registering the vehicle into your loan. Make sure these are included or that you can afford to pay them outright when you purchase the vehicle.
  • Double check your monthly payment to be sure that it still aligns with what you can afford.
  • Don’t forget to consider the cost of insurance, registration and titling, gas, and maintenance on the vehicle when looking at the total cost. It may not be included in the loan, but it’s all part of owning a car.


Financing a vehicle is only one part of the auto buying process, but we hope that these help you on the way to purchasing your next car!