When thinking about buying a new car, many often start off by shortlisting the cars they would like to buy. Once that is decided, they move on to figuring out how to pay for it. Instead, a wiser move would be to go the other way around. Start by looking for autofinancing options. Check how much lenders are willing to give you. But before you go to a lender, you need to do a certain amount of homework yourself.

• Go through your credit report
  After verifying your income, a lender will go through your credit report. Based on your credit report, the lender will determine whether you qualify for autofinance. You report will also determine the amount you are eligible for and the rate as well. So, always check your credit report before you apply for an auto loan. Verify all the information on your report and double-check for incorrect information. In case, there are any errors or issues in your report, get them rectified. Otherwise, you will be disqualified for a loan, or you will be offered an extremely high-interest rate. In case, your credit score is poor or subprime (that is lower than 600), try waiting for six months or a year trying to increase your score. A higher score can help you to qualify for a cheaper loan with a lower interest rate. Pay off your credit card balances and pay all dues and bills on time to boost your credit score before applying for an auto loan.
• Shop around for autofinancing options
  Once you have figured out your credit report, start looking around for autofinancing options. You can check out loans from large national banks, local community banks, local credit unions, online lenders, and even dealership financing. Compare quotes from each of these lenders. You can also go to your regular bank or credit union. They may offer you your preferred rate as an existing customer. If you are planning to buy your car from a private seller, ensure that it is permissible by the lender you are considering. A few lenders often have restrictions from where you can purchase your car.
• Get your preapproval
  After you have shortlisted a few lenders, start applying for offers and compare them. Some lenders may offer you pre-qualification, while some may offer preapproval. Pre-qualification implies that you will mostly get a loan at a given offered rate. The lender gives you a ballpark figure of the loan amount and rate based on limited personal and financial information after a soft credit pull. The rate may change after a full credit check. With pre-approval, the lender will give you an offer of a fixed loan amount and rate after a hard credit pull. This involves a complete review of your credit report and other information. A pre-approval gives more protection and advantage at a dealership when you are ready to buy your car. Remember that applying for preapproval will result in a hard credit check, which may bring down your credit score temporarily.
• Fix your budget
  The preapproval offer you get will not cover the entire cost of your next car. It is just an estimate of the maximum amount that you will be able to borrow. So, it is important to set your budget. Use an auto loan calculator to check how much you will be able to afford. Keep aside around 10% for fees and taxes. Figure out your down payment, lending terms, and trade-in value to calculate your potential monthly payments. After this, decide whether you will be able to afford this payment. If it is too much, go for a lower loan amount.