If you’re planning to purchase a new or used car (or even add a second, third or fourth vehicle to your household), it’s important to make sure that you’re financially prepared for the purchase. Of course, many of us don’t have extra dollars just sitting in the bank, which means that getting a car loan is necessary for most buyers. Taking out a vehicle loan can seem complicated, but with some careful planning and research, it doesn’t have to be difficult.

Here are six important tips to keep in mind as you seek financing for your next (or first!) car:

Tip #1: Decide how much you can afford

The first thing to keep in mind when considering a car loan is your budget, which means deciding how much you can realistically afford for a monthly payment and determining how much money you’ll need to cover the costs of purchasing and owning a vehicle. Keep in mind that it’s not just the monthly payment that you’ll have to manage – your total costs could be even higher. Other expenses, including insurance, registration fees and fuel might factor into the equation as well.

Tip #2: Shop for a great interest rate

While it isn’t always easy to find a car loan with an interest rate lower than the market average of around 15%, it’s definitely possible. The key is to make sure that you’re shopping around for the best deal, which means checking rates at several different banks and credit unions. While it used to be difficult or impossible to find an auto loan online, these days most lenders are happy to work with buyers who want to refinance their loans even if they’ve taken the car purchase and financing offline. Head to driva.com.au to compare personalised loan options from more than 30 lenders.

Tip #3: Make sure your credit is in good shape

One of the most common mistakes that people make with their vehicle loans is waiting until they’re ready to buy a new or used car before paying down their debt and working on improving their credit scores. Don’t make this mistake – you could end up with high-interest rates and monthly payments that are more than you can afford. Instead, take steps to improve your credit prior to buying a car (and while still making your vehicle loan payments!) by paying down some of your debt and continuing to make all of the monthly payments on time. Once you have a better handle on your credit and your ability to repay the money that you borrow, it’ll be easier to negotiate with lenders and find a great interest rate.

Tip #4: Ask about payment options

When you’re buying a car, it’s often easy to consider just the amount that you’ll pay each month – but don’t forget about the total cost of owning a vehicle over time. Your payments will be lower if you pay more per month, and that can help to reduce your overall out-of-pocket expenses. Ask your dealer or bank about different payment options – for example, you might choose to make biweekly payments instead of monthly ones in order to borrow less money and pay less interest over time.

Tip #5: Get pre-approved for your loan

Another smart move is to get pre-qualified or pre-approved by a lender before you start shopping for a car. This will help you to set your expectations accurately when it comes to price, interest rates and monthly payments because you’ll know what types of cars will fit within your budget before you head to the car lot or visit dealerships online.