Planning ahead can make the difference between a car you can afford and one you can’t. Before you start shopping for a car, look at your budget. Consider what length of loan makes sense in your situation and what you can afford for a down payment, monthly payment, and the annual percentage rate (APR).


  • See your PFM to fit a car payment into your budget.
  • Before you visit an auto dealer, find out about financing from your bank or credit union. It’s often the best deal available.
  • At the dealership, you can see if the dealer can beat your bank or credit union financing.
    • Is the dealer offering a special rate? Those sometimes have a high APR, require a big down payment, or a certain credit score.
    • Does the dealer require credit insurance for a loan they’d give you? The cost of credit insurance has to be included in the APR. There’s no federal law that says you have to have credit insurance – which would pay off your loan if you die or become disabled. Talk to your PFM about your state’s laws on credit insurance before you agree to pay for it.
  • Compare loans based on the APR.
    • The APR rolls up all financing costs into one percentage. It tells you how much you’ll pay for the money you borrow.
    • Your credit history affects the APR: a better history means a lower APR.
    • A really high APR can mean that you’ll owe more than the car is worth, if you decide to sell it before the loan is paid off.
  • Question any deal if the financing paperwork does not contain the:
    • APR
    • dollar amount of the total finance charge
    • amount of money you’re borrowing
    • total dollar amount of your finance charge plus the money you’re borrowing
    • amount of your payments, plus the number and due dates of your payments
  • Only sign a loan document that spells all this out – and never sign anything you don’t understand, or anything with blanks to be filled in later. Keep your copy of your signed contract.
  • Does your car come with a warranty? Keep a copy.
  • Having trouble making payments? See your PFM for guidance and options. Never pay any company up front if they promise to lower your payments or stop repossession of your car. That’s a scam.
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