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Determine how much new car you can afford.

Is it time for a new car? If you’re like most of us, you spend a considerable amount of time in your vehicle. This means there’s more to choosing the right car than selecting looks and features—it has to fit within your lifestyle. A big part of that is making sure you can afford the payments on your new vehicle without it impacting other important parts of your life.

How can you figure out what you can afford? Here are three steps you can take to plan your new or used car purchase in the smartest way possible.

Know your numbers

Understanding the numbers involved in financing a car is one of the most important parts of the buying process. We’re not just talking about dollars, but we’ll cover more about the real cost of buying a car a little later in this article. For now, we must understand the roles your credit score and auto loan play in the cost of your car.

Everything you need to get on the road in a new car.

Credit score

It’s no secret that having a good credit score can open many doors when it comes to financing big purchases. Before you head down to the dealership, it’s a good idea to take a look at your credit score and make sure it’s where you need it to be. Needless to say, the better your score, the better offers you’ll receive. But even with a lower credit score, you should be able to finance a vehicle. As you continue to make on-time payments on your auto loan, your credit score will improve.

Auto loan amount and interest rates

While you can apply for financing at a dealership, a better plan of action is to get preapproved for an auto loan before visiting the dealer. FAIRWINDS offers members premium deals on auto loans, including lower auto loan rates than many other lenders. Your preapproval means you’ll know exactly how much you can finance on your new or used car purchase, and it can be a powerful card to have in your pocket at the dealership.

Determine the real cost of a new car

Think the sticker on the window is showing you the full price of that vehicle? Think again.

If you’re shopping for a used car, the advertised price can increase once dealer fees, sales tax, registration fees and more are tacked on. With a new car, that number can soar even higher with dealer-installed add-ons, premium options, warranties and protection plans.

No matter what kind of car you’re looking to buy, factoring these additional costs into your budget can help you determine the real cost of your new vehicle.

Remember the 20 percent rule

Now that you have a more accurate idea of what your next car will cost you, there’s a simple trick to knowing if your estimated monthly payments fall within your budget.

Experts say your auto expenses shouldn’t add up to more than 20 percent of your monthly take-home pay. That includes any payments on loans, gas, insurance, registration fees, maintenance and repairs. A car loan calculator can help you determine your monthly payment based on your down payment and the length of your car loan. You can use that number to map out your additional expected expenses each month.

Before you get behind the wheel, be sure you have the numbers on your side. If you need help driving your decision, a FAIRWINDS auto loan expert can help you navigate the road to your new car.

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