Here’s what you should know before you finance a car

• • Look past the price to understand the total cost of owning a car.
  • Reduce stressful guesswork by getting pre-qualified for financing in advance.
  • Plan and estimate your down and monthly payments.

When it comes to buying a car, you don’t need to leave the house to be in the driver’s seat. You can understand the costs of buying and owning a car and choose the best financing options for you from the comfort of your home. Knowing your financing terms can ease stress and ensure you find a vehicle and financing that work for your lifestyle and budget.

Make sure you keep these tips in mind when starting your search.

Understand the total cost

The price tag of the car is only the starting point. There are several other costs that are often overlooked but can add up quickly, including:

• Vehicle registration fees: This is what the state charges to register a car, assign the title (the legal proof of ownership), and cover the cost of license plates. Each state has a government-run website, such as Department of Transportation (DOT) or Bureau of Motor Vehicles, that should have information on these various costs.
• Auto sales tax: If your state charges sales tax for vehicle purchases, you’ll have to pay tax on a car (much like you do other goods). A 9% sales tax for a used $22,000 car would be $1,980. Some cities and counties also have an additional tax.
• Documentation fees: The “doc fee” covers the cost of preparing and filing the sales contract and other paperwork. Some states cap how high a documentation fee can be. This is also available on your state’s DOT website.
• Dealer fees: This catch-all term can apply to such things as shipping and handling, dealer prep, and advertising. Unlike sales tax, dealer fees aren’t set in stone — you can sometimes negotiate them down.

Other costs can arise. For example, you might choose to get an extended warranty, which extends the time that certain repairs could be covered without an additional charge.

In addition to the costs of buying a car, you should consider the ongoing costs of operating a car — like insurance, gas, and repairs — which may affect which model you choose.

And before you make your purchase, think about how long you plan to keep your car. New cars can depreciate by about 20% in the first year and then by about 10% a year for the next four years, though this varies by make and model. Used cars lose value at a slower rate.

Get pre-qualified

Once you have an idea of how much you can realistically spend on a car, the next decision is how to pay for it. When you finance a vehicle, you agree to pay the amount financed, plus interest and finance fees, over a period of time.

If you opt to wait until you choose a car at the dealership and then subsequently choose financing, you may be presented with limited financing options.

With the shift to a digital-first car buying process, you can determine the financing part of the transaction earlier than before. Rather than waiting until you’ve found the right car, you can factor financing options alongside what the right car is all from the comfort of home. With Auto Navigator from Capital One, it’s easy to search for vehicles and see if you pre-qualify for financing without impacting your credit score — online or using the Auto Navigator mobile app.

You can reduce the amount of time spent at a dealership by pre-qualifying before you even take a test drive. Pre-qualification means that you can have a more realistic look at potential payments, but without having a hard pull that could ding your credit score. By pre-qualifying for financing before you go to the dealership, you can know your financing terms for the exact vehicle you’re eyeing.

Know your payment options

Experts have traditionally recommended that buyers put down 20% of the purchase price, but 12% is more typical today. If you can responsibly put down 10% to 20%, that could help lower your monthly payments, which can save you money and build equity faster. Some people buy cars without any down payment. It’s important to consider your financing terms and what makes the most sense given your personal finances.

Online calculators, such as Capital One’s car payment calculator, can help you work through your options and determine the ideal term length for your budget.

By being aware of all the costs and choosing the financing approach that’s best for your situation, you can remove a lot of the stress of one of life’s biggest purchases. Then the only decisions you’ll have are fun ones, like where to drive to next.

Find out how Capital One can help you finance your next car.

 This post was created by Insider Studios with Capital One.