gmf|us|en|financial-resources|articles|considerations-before-auto-loan-application en_us en-us
Back to top


Get prequalified! It’s the first step in financing your next vehicle.

Apply Now
Young couple asking a car salesman questions about auto financing at a dealership.

Top 3 Things to Know Before Applying for Auto Financing

Paying for a new vehicle isn’t always as easy as showing up at the dealership and writing a check — especially if you intend to finance part of the purchase. It’s important to prepare before you apply for auto financing. Here are three ways to plan for your next car-buying experience.

  1. Know your credit score
    When it comes to creditworthiness, your credit score is one of the most important factors lenders will consider. A higher credit score lets them know you’re less of a risk and more likely to make payments on time, every time. Another benefit of having a high credit score is that you can usually get a lower interest rate.

    Not everyone is a well-qualified buyer or has a high credit score, but there are steps you can take to improve it. For example, paying your bills on time, keeping your credit card balances low and maintaining a healthy debt-to-income ratio (or the amount of debt you have in relation to your income) demonstrate good credit practices. It will also require patience as building a solid credit history takes time.
  2. Understand your budget
    Take a realistic look at your budget. Our online affordability calculator can help you estimate not only how much car you can afford, but also the monthly payment. Factoring in your other monthly expenses, this will tell you if you can afford a new auto loan payment.

    Income stability and your spending habits can affect the success (or downfall) of your budget. Not sure what your current budget situation looks like? You might try the 60-40 budget or zero-based budgeting to help shed some light on your saving and spending habits. By tracking your income and expenses each month, you’ll be able to identify whether there’s room in your budget for a car payment.

    Is a larger down payment an option?
    When you purchase a vehicle, a down payment is money paid upfront to help reduce the amount financed. Your down payment goes toward the price of the vehicle, so your monthly payment will be less.

    If you can afford it, a larger down payment on a vehicle purchase can be a savvy financial move — either reducing the amount you finance, or maybe even allowing you to upgrade the vehicle you purchase.
  3. Consider your vehicle
    You may be dreaming about a heavy-duty new truck or an electric vehicle. The good news is there’s a type of vehicle for everyone. However, it’s important to keep in mind your budget and lifestyle. For example, it may not be practical to purchase a sports car if you need room for two car seats and a dog.

    Consider taking a test drive to find the one that’s right for you. Then see how those options fit your budget before applying to prequalify for financing.

Are you prepared for auto financing?

Remember, it pays to plan before you get to the dealership. Here are the three things we covered to keep in mind when you consider auto financing:

  1. Know your score. Request a free copy of your credit report, so you understand your credit history and how you might qualify for lower interest rates.

  2. Determine a budget. Calculate how much of a down payment you can make and the maximum monthly payment you can afford.

  3. Shop around. Once you have an idea of your budget, explore current offers to find a car, truck or SUV that meets your needs.

If you still have questions about preparing to apply for auto financing, this step-by-step guide may help. The more you know, the more confident you’ll be getting behind the wheel of your next vehicle.

Lori Tutt
By Lori Tutt, GM Financial

From cars and movies to great works of literature, Lori Tutt has a passion for the classics. She’s never claimed to be good with numbers but can readily find the right words to describe money matters like budgets, investments and understanding credit. And when she’s stressed, she turns it around with desserts (or clever wordplay).


Ready to get in the driver's seat?

See if you prequalify for financing.

Apply Now

Related Articles

Male sales man shaking the hand of a female customer standing next to another female in a car dealership showroom

How to Prequalify for Auto Financing

It’s quick, easy and won’t affect your credit score. Understand the process to prequalify for auto financing.

A portion of an auto insurance policy and a key fob from above.

4 Car Insurance Factors and 5 Ways to Drive Down Costs

What impacts your car insurance rate? Learn what can raise your rate and strategies to reduce it.

/content/gmf/en_us/search-results.html /content/gmf/en_us/financial-resources/articles/considerations-before-auto-loan-application/jcr:content true /en-us/resources/lease-end/get-going.html /en-us/resources/lease-end/get-inspected.html /en-us/resources/lease-end/get-started.html /en-us/resources/lease-end.html