A vehicle is the first major purchase many young adults make. However, before you buy, make sure you know how much you can really afford. It is easy to get carried away and end up with a car or truck that is out of your price range. To know the amount you can afford to spend, revisit your budget. Consider not just the monthly payment, but also the cost of insurance, maintenance and repairs, gas, and parking too.

If you are not going to buy a car or truck outright, you will be borrowing for it. The more you borrow (finance), the more the vehicle will cost, so try to make as large a down payment as possible. When shopping for the best deal:

• Don’t be fooled by an advertised low monthly payment. If the length of the loan is long and the interest rate high, you may be paying more than you have to.

• Look for incentives. Dealers may offer reduced finance rates or cash back on specific models. However, avoid buying an expensive car just to get incentives. You may wind up spending more money on a fancy car with a low, promotional interest rate than an economical car with a higher interest rate.

• Negotiate. It is common to haggle over the price of the car, but if there is no special financing offer available, you may also be able to negotiate the interest rate and other repayment terms with the dealer.

• Do research. Compare the dealer’s financing with the loan you can get through your financial institution or other lenders. If you go to your financial institution before you start your car search, you will have a better idea of how much you can borrow and, thus, what cars you can afford. Furthermore, you may be able to get a better interest rate with your financial institution than a dealer. Even though dealers often offer incentives, they do not always have the best financing.

Before signing any documents, read the contract carefully. Make sure you understand and agree to the:

• Price you’re paying for the vehicle
• Amount you’re financing
• Annual percentage rate (APR – the rate of interest you are charged annually)
• Additional finance charges
• Number and amount of payments
• Total sales price