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Tips For Buying a Car and Getting an Auto Loan

Know what you can afford: Determine what type of vehicle best meets your needs, set a realistic price range, and develop a comprehensive budget for owning and operating your car or truck.

Decide how you're going to pay for it: Some first-time car buyers purchase a used car or truck with cash they've saved or borrowed from a family member. Others, however, work on their own or with their parents to finance a vehicle through a bank, credit union, or at a dealership.

Review your credit report: To know what creditors will see, obtain a free copy of your credit report. Plus, this will allow you to correct any errors you find.

Comparison shop: The auto financing industry is highly competitive, so use the marketplace to your advantage by comparing annual percentage rates and other financing terms from multiple sources, such as banks, credit unions, and auto dealers.

Know Your Stuff: Make sure you are familiar with common terms you're likely to hear or read in the course of purchasing or financing a vehicle, such as down payment, fixed- and variable-rate financing, and on- and off-site financing. Many of these terms can be found at http://www.autofinancing101.org/resources/glossary.asp.

Negotiate: This finance rate you are offered is negotiable, as well as the price of the vehicle.

Understand the value and price of optional services: Examples include credit insurance, guaranteed auto protection, and extended service contracts. If you do not want such services, do not sign for them.

Read any contract carefully before signing it: Ask questions about anything you do not understand.

Make your payments on time: Late or missed payments incur late fees and can even cause your vehicle to be repossessed, permanently. A bad payment record will also appear on your credit report, damaging your ability to get credit in the future.

AWARE also stresses the importance of distinguishing between wants and needs. "Students may want satellite radio and a GPS system, but that's often out of financial reach and could very well get a young automobile buyer into economic trouble," he said. "Instead, students should concentrate on financing a safe, reliable car that is economical to operate, repair, and insure. Understanding these differences is the first step to building a strong credit history for the long term."

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