Buying a new vehicle is a significant purchase. Next to a home, a new vehicle is the largest single purchase for most people. The sales price of a new car or truck could be more than one year’s take-home pay. Add in the cost of gas, insurance, and maintenance, and you’re looking at a major expense.

You’ll need to have your finances in order before shopping for a new vehicle. Sound finances can make the difference between being able to buy the car you want and having to settle for something else.

1. Your Credit Record

You may be planning to finance your purchase. If so, you’ll need to ensure your credit record is good. It doesn’t have to be exemplary, but a decent credit score can save you thousands of dollars in interest payments over the life of the loan.

Carefully review your credit files at each of the major credit reporting agencies. Dispute any errors you notice. AFederal Trade Commission study found one in four people had errors in their files that might affect their credit scores.

Avoid unnecessary credit inquiries. Every time you apply for a new credit card, the credit inquiry can temporarily lower your credit score by three to five points. This could make the difference between loan approval and disapproval.

Decreasing your existing credit card balance also helps your credit score. Aim for keeping your balance at less than 10% of your limit. You can also ask lenders for a credit limit increase.

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2. Budget for Your Purchase

Next, you can figure out how much you can afford to spend on your new vehicle. Include not only the sales price but also gas, insurance, and maintenance. Remember that some vehicles use more gas and cost more to insure than others.

Prepare a sufficient down payment so you don’t end up with huge monthly car payments. If you can’t get the car you want right now, some options are to save up for later or buy a used car.

3. Get Pre-Approved

After you have your credit file in order, you can get pre-approved for a loan. The interest rates and terms can vary widely between lenders, so shop around for the best deal. Getting preapproved speeds up the buying process at the dealership. It can also help you negotiate. The dealership will know you’re serious about the purchase and may even try to beat the preapproved rate.

4. Shop and Compare

Now you can decide which vehicles are in your budget. There may be several vehicles. Visit different dealerships for test drives. The dealer may try to convince you to buy a car on your first visit, but you’ll want to test drive each car you have in mind before you decide.

Visiting different dealerships will also let you see what each dealership is asking for each vehicle. This will be useful information when you’re ready to make a purchase. You can also ask what extended warranties each dealership is offering and decide whether these are right for you.

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5. Do Your Research

After your test drives, you’re in a position to decide which car, including options and upgrades, you want. By knowing in advance exactly what you want, you won’t succumb to the dealer’s pressure to buy options and add-ons you don’t need.

This research will prepare you to get the best purchase price. Different websites will tell you the dealer cost, or invoice price, for the vehicle. You can use that cost as a starting point for your negotiations. You might also work with a car-buying service, which will negotiate a price for you. The dealership may be willing to beat that price.