Let’s face it: If you are like most people, you’ll have to finance your new car purchase. But just because you are paying off your car instead of buying it outright doesn’t mean you have to pay a lot in finance charges. Doing your homework instead of simply relying on the car dealer’s loan offer could save you money over the life of the car loan.

Before you choose a car to purchase, figure out how much you can afford to pay based on the finance terms of the car loan and different interest rates. Bankrate’s auto loan payment calculator can walk you through the process.

Once you know how much you can afford, consider why you need the car. Will you be towing three little ones around, or will it be used primarily to get you to and from work? Determining your needs will ensure you are financing the purchase of a car that you’ll keep for the long haul or at least for the life of the car loan.

Know your credit score ahead of time

Even before you start shopping, check your credit reports to make sure there aren’t any errors. If you find some, correct them because your credit score is one of the factors that determines how high a finance rate you’ll have to pay. It may pay to get pre-approved for a car loan before you even visit a dealership. That way, you’ll know how much vehicle you can buy and the interest rate you qualify for. It can be a powerful tool to negotiate the finance rate with the auto dealer. Remember, you should negotiate the finance charge just as you would the car price.

Avoid extras

Don’t be lured into adding extras to your car loan like a warranty or credit life insurance. Often, these items can be obtained for a lower cost outside of the dealership. Paying interest on the extras can add a lot of money to the overall amount you pay for the car.

Auto dealers may be the convenient place to finance your new car, but they aren’t the only game in town. Banks, finance companies and credit unions also offer financing. Compare rates before deciding on a loan.

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