It’s always a good idea to review your finances before buying a car to ensure the model you choose will fit comfortably into your budget. After all, getting a car you can barely afford — regardless of how nice it is — will give you more worries than pleasure. With that in mind, here is how to use an auto loan calculator to save your money, and prevent sleepless nights.

Review Your Credit History

Your credit score is one of the key factors determining what you’ll pay when you finance a car. Meanwhile, your credit score is predicated upon the information contained in your credit report. This is why it’s important to review your credit report on a regular basis to ensure the information reflected there is accurate.

Mistakes happen, fraud does too. Erroneous information can find its way onto your credit report by a number of different means. Your name and Social Security number could get crossed with a similar one. People supplying the data to the credit reporting agencies could make mistakes. Or, someone could be out there using your identity without your knowledge. The good news is you can get free copies of each of your credit reports at

Look specifically for accounts you don’t recognize. You also want to make sure your payment history is accurately portrayed. Dispute any errors you find and make sure they’re cleared up before applying for loans. The interest rate you’ll be offered will be based upon your credit score, which you can get from any of the three reporting agencies, Experian, Equifax or TransUnion.

Review Your Budget

The next thing to do is determine how much you can afford to spend on a car each month Keep in mind; the loan payment is only part of what you’ll need. You’ll also pay for fuel, perhaps a garage rental and several other related expenses. This information will be familiar If you’re already making car payments. You’ll want to pay close attention to these factors if this is your first car.

Make a list of all of your monthly expenditures, as well as the money you put away for your emergency fund, savings and investments. Take that total and subtract it from your monthly after-tax income and you’ll have an idea of what you’ll have left to put toward transportation costs.

One more thing, you’re going to need a down payment on the loan. Most experts recommend at least 20 percent of the purchase price of the car. If you can’t swing that, try to have at least $2,000. Remember though, the more money you put down the lower your monthly payments will be.

How Much Car Can You Afford?

Now that you know what interest rate to expect and how much money you have to put down, you’re ready to plug that information into an auto loan calculator to see where you should try to be in terms of a purchase price to keep the car affordable.

The other variable you’ll be asked to input is the length of the loan term you’d like. Be advised you’re looking a car you can’t afford if you have go more than 60 months to make the payment fit into your budget.

Knowing how to use an auto loan calculator to determine what you can afford will help you negotiate a better price on your new car. It will also help you avoid being “put” into a car you can’t really afford by an eager salesperson.

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