Get wise about buying or leasing a vehicle


— For many people, buying or leasing a car is their first “big ticket” item. Having a plan for how this new vehicle will fit into your budget can help you be confident about your decision and keep your finances in check.

“Planning for large purchases can seem daunting, but having the right information about your finances can make it easier to meet your goal,” says Mike Kane, vice president of Consumer Credit Operations at Ally Financial.. “Get prepared so you can walk into the dealership with confidence.”

With that in mind, Kane is offering some tips to help you make a smart decision.  

• Do your research. Sure, you’ll want to research what kind of car and options you want, but also do your financial research. Use free online tools like payment calculators or vehicle valuation guides to help you prepare.

• Evaluate your wants and needs. You may want the car with all the bells and whistles, but if it doesn’t fit into your budget, it’s not a wise purchase. Decide what you need versus what would be nice to have, and stick to that when negotiating.

• Create a doable budget. Whether you buy or lease, you’ll likely have a fixed amount to pay monthly for your new car. But that’s not the only cost to consider. Remember to factor in gas, insurance and any additional costs like maintenance or emergencies. A general guideline is to keep those total costs below 20 percent of your monthly take-home pay.

• Know your credit profile. If you are planning to finance a vehicle, your credit score can affect whether you are approved for financing, as well as the rate you will receive. A number of financial institutions, like Ally, have begun providing customers with their FICO credit scores for free. Look into whether your bank is among them. You can also obtain your credit report from each of the credit reporting agencies (Equifax, Experian and Transunion) for free once yearly at

• Understand your options. There are a few different options when buying or leasing a vehicle, such as paying cash, getting a loan from a bank or credit union, or negotiating a retail contract or lease through a dealership. If you finance your vehicle, the length of the finance contract can impact the total amount you pay. The longer you take to pay, the lower your monthly payments will be, but your total cost to finance rises. Visit different dealerships to learn your options. It’s up to you to decide the best arrangement for your personal financial situation.

• Stick with your plan. If you plan to set aside a certain amount regularly for your monthly payment — do it! It’s easier to get ahead and build a savings plan instead of playing catch-up.

For more auto-related financial advice and for free resources, visit

If you’re considering buying or leasing a car, brush up on your finances first, so you’ll be better prepared to walk into the dealership.