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Planning to Buy a Car? Take These Five Steps First

Planning to Buy a Car? Take These Five Steps First

The end of the year can be a good time to shop for a new or used car or truck. Many car dealers are working to get the previous years' models off the lot and offer price cuts and other incentives that could save you money. It's easy to get caught up in the excitement of shopping for a new vehicle, but since cars and trucks are a relatively big investment, it's smart to do some careful planning before you take that test drive.

1. Know how much car you can comfortably afford.

Review your budget and find out how much you can afford as a monthly payment if you plan to take out a loan to help pay for the vehicle. Once you know how much money you have in your budget for a car payment, there are online calculators you can use to estimate how much car you can afford. It's smart to stick to the lower end of what fits comfortably into your budget to avoid problems making your loan payments over time.

2. Calculate the other costs of owning a vehicle.

Keep in mind, you'll be spending more on your car or truck than the monthly loan payment. Get estimates for the required insurance. It's also helpful to have an idea of what the cost of maintaining your vehicle will be. Choosing a car that gets better gas mileage can save you money, while buying a less fuel-efficient car or truck can end up costing more than you think. Don't forget to figure in the cost of your vehicle's registration and any recurring other state and local fees.

3. Check your credit rating.

If you plan to take out a loan to help pay for your new car or truck, it's helpful to know what your credit history and score are. Lenders base the interest rate they offer you on this information. Check for any errors on your credit report that could have a negative effect on your ability to borrow at a lower rate. If you find errors, contact the credit bureaus to correct them before applying for a loan.

4. Do some research.

An informed buyer is more likely to get a better deal. Before you visit dealerships, find out what the dealer paid for the vehicle. The sticker price on most cars and trucks can include thousands of dollars of dealer profit. You should also check the manufacturer's website to find out if there are any available rebates or other incentives. You may also want to look on the Internet or ask friends and neighbors about their experience with a dealer. Was the dealer fair? Was there a hard sell?

5. Negotiate a better price and choose the right financing.

Before you make a decision about where to buy your vehicle, get an online quote from a number of dealers in your area so you can compare prices. If you're taking out a car or truck loan, get a quote from some financial institutions so you can compare those numbers with what the dealer may offer in terms of financing. Remember, longer-term loans may lower your monthly payment, but you'll end up paying more for your vehicle in the long run.