Need a Car? Follow These 4 Steps Before Setting Foot in a Dealership

It definitely pays to go in prepared.

Many of us need a car to function. But owning a vehicle can be an expensive prospect. You need to fuel it, insure it, and deal with monthly payments if you end up financing it.

And many car owners do end up financing vehicles because they don't have piles of cash lying around. If that's the boat you expect to be in, don't sweat it. But also, don't just waltz into a dealership without preparing first. In fact, it pays to take these essential steps, as suggested by Your Rich BFF, before going to look at cars in person.

1. Check your credit score

Your credit score speaks to how trustworthy -- or risky -- you are as a borrower. Now there's no minimum credit score needed to finance an automobile purchase. But the higher your credit score, the more favorable the terms of your auto loan are apt to be. And a higher credit score might result in you paying a lot less interest on your car loan, thereby keeping your monthly payments more manageable.

As such, it's important to check your credit score before looking at cars. If you see that your score needs work, you can take some steps to improve it before submitting an auto loan application -- and getting stuck with an unfavorable borrowing rate that drives your costs up.

2. Figure out how much you can afford to borrow

It's easy to get tempted by a car that comes loaded with cool features. But if buying that car means signing an auto loan with $750 monthly payments and the maximum amount you can afford is $450 per month, then you're taking a very big risk.

Before you go to a dealership, sit down and check your budget (or set one up) to see how much of a car payment you can swing. Remember, you don't want to get in over your head with an auto loan, because then you might fall behind on other bills, like your mortgage or utility costs.

3. Shop around for financing

If you know you'll need an auto loan to finance a car purchase, don't just rely on the financing numbers you're offered at the dealership. Instead, shop around to see what options you may be privy to. You can research different online lenders to see what their borrowing rates look like.

4. Apply for pre-approvals

Just as you can get pre-approved for a mortgage, so too can you do so for an auto loan. Doing so will give you a sense of how much you can afford to borrow.

Now if you're going to shop around for pre-approvals, make sure to do so within the same 14-day period. Each time a lender digs into your credit history, it counts as a hard inquiry on your credit report.

A single hard inquiry can cause your credit score to drop by a few points, which usually isn't such a big deal. But you don't want multiple hard inquiries in short order. However, if you shop around for the same type of loan within the same two-week time frame, those various hard inquiries will only count as one.

The more you prepare before entering a car dealership, the better a deal you're likely to snag -- and the less likely you'll be to make an automobile purchase you wind up regretting.