The first thing to do is get yourself ready to qualify for a loan. The best place to start is by making sure that your credit report is clean. If you have bad credit it is going to be very difficult to qualify for a conventional automotive loan. Even if you have good credit take a look and see if there are any old items on there that you can have removed. Bad marks against your credit can be removed after seven years and just one or two of them on your report can significantly lower your credit rating.

The next thing to do is to make sure you have a nice down payment. Lenders love to see a potential client that is willing to invest their own money up front. This also raises the chances of you actually being accepted by lenders as they see you as less of a risk to default on a loan. Remember the less strong your credit rating the more money you should have available for a down payment.

Another mistake that is often made when trying to get approved for a car loan is trying to by too much car for your specific financial situation. It is important to know the difference between what you want to drive and what you need to drive. For example when you are looking at a vehicle it might be nice to have a fully loaded convertible but do you need it? The same car with a few less options may fit your financial situation better and be more practical which the lenders will look at this when deciding whether to approve you.

With the credit market

tightening up it is becoming increasingly more important to know who is actually lending money for auto loans. The quick answer is to steer away from the larger banks. They have found themselves in a jam over the housing market and they are very tough to get money out of right now. A terrific place to get money is with a credit union. If you are a member they tend to give you much more leeway when it comes to getting financing.

The other place that seems to be willing to loan money is the automakers themselves. They all have their own financing companies and since it is in their best interest to move their inventory, they are still willing to make the loans. So when you are looking for an auto loan, get your credit ready, have a deposit, know what you can afford and know who is lending money.

The first thing you want to consider is the length of the loan. Do you want to have a sixty month, or longer loan, or do you you want to pay it off now. If you do financing for sixty months, or longer, you will pay more in interest to the lender.

If you pay off your loan as soon as possible they will not be making as much interest. You want to choose an affordable payment, yet pay it off quicker if you can.

A lot of people will do sixty or seventy two month payments now because it is a lower interest rate and a lower monthly payment. Then they will pay double payments in months when they can to pay it off quicker.

If you should have bad credit the new or used car you buy will cost more in interest because you are going to pay a higher rate. So again, if you can pay it off sooner you will save more money.

Let’s look at this example of what interest can do to you and the total amount of money your car will end up costing you.

- You buy a car for thirty thousand dollars

- Your payments are $450 a month for 84 months

- Your total payments would be $37,800

- You will have paid over $7,000 in interest on your auto loan.

You have to be very careful when buying a car because with that comes the car loan, and you have to know which kind of a loan will go best for you. Just because they offer a low rate to get you into the showroom does not mean that is the rate you will get. For many people the interest rate will end up higher when it is time to sign the papers.

In summary there is more to buying a car than the make and model. Your auto loan will play a big role in determining what you can afford. It can also affect your financial future.

You want to negotiate the best deal up front when you have some leverage as a new buyer. Your current credit situation will partly determine the interest rate of your auto loan which in turn will affect you payment.