Imagine you’re on your way to work when you trusty old rust bucket of a vehicle finally dies. Unless you live in a city and can take public transportation, you’re probably going to need to buy a new car. Or a new to you car.

Ideally, you would love to be able to pay cash, but the harsh reality of it is that you are probably going to need to get a loan to buy something.

As someone who has never had to get an auto loan in her life, (those Honda’s I tell you. They last forever) I felt like I was probably the last person who should write about what to know before getting an auto loan.

On the other hand, as someone that’s never had a car loan, I might be the perfect person to educate those other loan newbies on what I think they should know before they jump into it.

(I thought about buying a new car and getting a loan for research purposes, but decided I didn’t want to have to explain that one to my husband.)

According to the Federal Trade Commission, the average price of a new vehicle is around $31,000. Because that’s kind of a big deal, it’s important to go into it with a few facts and tips.

1.)Know Your Budget! It should go without saying that even though you really want that fancy sports car, you don’t want to be paying more in bills than you make in a month. Before you even begin shopping for a new vehicle, you should figure out roughly how much you are willing to spend. Look at your current bills and your income and figure out what a reasonable monthly payment would be for you.  Don’t forget to factor in the price of gas, insurance, registration and routine maintenance for the vehicle.

2.) Down Payment or Not? Putting money down will essentially lower the amount that you need to borrow, which in turn, will lower your monthly payment. If purchasing a new vehicle isn’t an immediate emergency, it’s a good idea to set aside some money each paycheck toward a down payment. Trust me, you’ll thank me later.

3.) Length of Loan? Something else to consider is how long you want to be paying off your vehicle.  Typically, the shorter the term of the loan, the larger the monthly payment.  On the flip side, you will be paying the loan off quicker, and paying less in interest.

4.) Know Your Score! The better your credit score, the better your interest rate. Up until this year, I had no idea what my credit score was or that I could even find that out. Did you know that you can access a free copy of your credit report from each of the three main reporting bureaus once per year? You can request them all at once or break it up within a 1 month period of time. You can check for any discrepancies or errors and fix them to help improve your score.

5.) Shop Around! Not only is it important to look for the best rate, you should also look for a lender that will give you flexibility when it comes to your loan.  Will they allow you to make extra payments, or pay the loan off early without penalties? Ideally, you never want to be late on your payments, but if you are, what is the late fee and do you have some sort of a grace period?

Now that you have these tools, you’re ready to go get yourself a new car.  You should probably figure out what type of car you want first, but I can’t help you with that.

Don’t lose hope if you’ve made a bad lending decision in the past. Your local credit union may still be able to help save you money. Year to date, HarborLight Credit Union has saved it’s members $480,393.53 by refinancing their loans from other financial institutions.