The problem with vehicles is that they don’t last forever. Maybe up until now, you’ve been driving a hand me down car and it’s on the verge of dying. Unless you live in a city and plan to rely on public transportation, you’re probably going to need a new set of wheels.

In order to do that, you’ll have some decisions to make. Getting a new car can be stressful, especially if you’ve never gotten a loan before. Since this is a pretty big purchase (maybe your first big adult decision), it’s important to do your research and know what you’re getting yourself into.

  • Decide On A Budget: How much do you want to spend? If you’ve been saving up money for this moment, maybe you’ve decided to only buy what you can pay for in cash. The majority of us, however, will need to apply for a loan to purchase a reliable vehicle. Look at your income and current expenses and figure out what a reasonable monthly payment might be for you. Be aware that a reasonable payment might mean that you can’t get a brand new sports car with all the extras. The price of gas, insurance, registration and routine maintenance are factors that should also go into your decision.

  • What Type of Loan? How long do you want to be paying on your vehicle? Typically, the shorter the term, the larger the payment. If you want to stretch it out further, you’ll pay more in interest but have a lower monthly payment. Consider making a down payment towards your vehicle. The less you have to borrow, the better. If getting a new vehicle isn’t an emergency or if you’re just planning ahead, it’s a good idea to start setting some money aside now.

  • Shop Around: You probably aren’t going to buy the first vehicle you see, so why would you get your auto loan at the first financial institution you come across? You want to look for a lender that not only has the lowest interest rate on a loan, but also one that will give you some flexibility. Ask if you will be penalized for paying the loan off early. What is the late fee and is there a grace period before you are charged it?

  • What’s Your Score? If you have a lower credit score (under 670), you may want to work on improving that before applying for a loan. Myfico.com has tips to help you do this. You can get a free copy of your credit report from the 3 main reporting bureaus once per year. Review them to look for any discrepancies or errors. If there are, contact the credit reporting bureaus to have them corrected.

Don’t fret if you’ve heard horror stories from your family or friends about a bad lending decision or you’ve made a bad lending decision in the past. Your credit union is a great resource for education and lower loan rates.