In our world of fast, easy credit you may have the power to buy the car of your dreams, but if you’re not careful you could end up in a debt nightmare. This article concentrates on the mistakes that you are likely to make while taking a loan for your car – often the single purchase people are most likely to fixate on and daydream about.

Though it is seemingly obvious, it is worth repeating: carefully think about your options and your needs. How often have you heard people say that they’ve always wanted a particular car? Very few purchases are so obsessed over or seen as a status symbol by so many and this is a combination that can lead to impulsive, uncalculated purchases.

The most common error made while buying a car is seeing it as a short term investment and hence being casual about it. The significant price of a new car will certainly have an impact on your budget, so make sure your budget has an impact on your choice – carefully consider your options but above all pick a car that is right for you and that you can truly afford.

To aid in this, it is imperative to decide what car you want to purchase and how much you are willing to pay before beginning in depth discussions with salespeople at a car dealership. Do not get carried away by the persuasion of the dealer into making decisions that you are going to regret later – whether by buying the wrong model or agreeing to too high a price or too many fees.

Almost any new car is going to look great on the lot and seem great when the salesperson talks about it, so try to get an unbiased perspective on the performance and reliability of various models from trustworthy publications first.

After choosing an affordable model that fits your needs, you still have to get an auto loan to actually pay for it. Regardless of whether you finance through a bank or car dealership, following these steps will help you get the best possible deal:

• Carefully go through your credit report and FICO score (it’s the score that most lenders use to assess your credit risk), so that you can rectify any possible errors in order to qualify for the best loan terms. Also, being confident about your credit history prevents unscrupulous lenders from lying about your credit in an attempt to charge you higher interest rates.
• Never focus solely on one term of the loan. Do not allow a low monthly payment or a seemingly great interest rate cloud your big-picture view of the loan’s terms. Always keep the actual price of the car and length of the loan in mind because a seemingly incredible rate or monthly payment can often be a hook for a loan that is a very poor deal for you overall.
• Cars are commodities that depreciate in value very quickly so it is always a good idea to opt for the shorter length, higher payment car loan. Very few cars are good investments, and a higher payment loan truly makes you examine what models are in your price range. Unlike a mortgage, where at the end of the loan you are have a property that is generally worth more than your purchase price, cars lose most of their value with age and use - even driving a new vehicle off the lot significantly decreases its worth. Focus on this sobering fact to avoid getting carried away with financing your auto purchase. Also, choosing a shorter term loan gets you a lower interest rate which means you actually pay less for your car.
• Finally, always keep in mind that even if you have spent long hours pursuing a particular deal, you are not obliged to seal it. Retain an objective outlook and the ability to walk away. Sometimes, car dealerships count on the fact that people are either too invested or feel too guilty to stop the process. If you don’t like the way the deal is shaping up, leave before it is too late.