Spring car shopping? Take care of financing first

(BPT) - Auto shows dotting the country paired with rising temperatures leave many people longing for a new car or truck. But purchasing a new vehicle is a complex process – one that doesn’t start with finding the right car, but with making sure your finances are in order. It’s important to plan ahead so there are no surprises during the loan application process that leave you stranded without options.

Long before you hit the dealership, sit down and go over some important variables. First, determine your budget and what you can realistically afford. Remember, your car payment may be the largest consideration, but it’s only one part of the total monthly cost of owning a new vehicle. You must factor in gas, insurance premiums and regular maintenance to get an accurate amount. Once you know your magic number, stick to it so you don’t get in over your head.

After you have a general idea of what you can afford, you should check your credit to see if you are a good candidate for a loan before you start shopping. A good first step is to check your credit reports. Is everything accurate? What is your debt-to-credit ratio? Are there items you want to work on before applying for a car loan?

While proactively reviewing what’s on your credit report is one of the fundamental ways to get a loan with preferable terms, it doesn’t tell you what your credit score is. To obtain your credit score and stay on top of your financial health, become a member of TransUnion Plus. TransUnion Plus gives you access to your credit report, your credit score, and the ability to track all your finances, such as your checking, savings and 401(k) accounts, so you can manage your money seamlessly, plus you get credit and identity theft protection.

Once your credit score and credit reports are in order, and you can feel confident about your ability to get a loan, there is another thing that financially savvy drivers should do: research financing options. Many people find the car they want and finance through the dealership, but these drivers may be missing out on other options that could save plenty of money. Shop around to see who has the best interest rates, determine how much you want to put down and decide what length of loan term works best for you. Also, remember to ask about pre-payment penalties – you shouldn’t be punished for paying your loan off sooner than promised.

Before you take your first test drive, take some time to decide between new and used vehicles. While a brand new vehicle with a great warranty has its appeal, it also has a high level of future depreciation. Because the rate of vehicle depreciation tends to be steeper during the first year or two, purchasing a slightly older car may be a better value in the long run, depending on how long you plan to own it. Research your options before making any decisions, including certifications and extended warranties.

If you’re young or are recovering from poor credit, you may find that even after going through all these steps, you still don’t qualify for a car loan, or if you do, it’s not enough or the interest rates are incredibly high. One option for people in these situations is to get a co-signer for the loan. Consumers should be cautious when co-signing a loan because a co-signer accepts the same responsibility for the loan, so if one person defaults, it can affect both people’s credit. Make sure if you need a co-signer, or even if you’re asked to be one, that you know the person well and he or she is trustworthy and reliable.

After you get yourself in shape financially, it’s finally time to hit up the auto shows and car dealerships to negotiate a deal. The only thing better than driving your new dream car is having the ability to pay for it without extra financial stress.