Envy for a new car. It can happen at any time. When a muscle car or a luxury sedan pulls up alongside you at a stoplight, you may gaze at it longingly. Or when the shiny SUV parked next to you draws attention to the dents in your beat-up car.

Although older cars can have aftermarket safety technology added, buying a new car is the best route to get the latest electronic safety equipment, such as forward-collision and lane-departure warning systems, as well as features like a blind-spot warning system and a rear backup camera. Only the most recent vehicles perform well in the most recent insurance-industry crash tests.

Whatever your reasons for wanting a new car, here are some things to think about when considering your vehicle upgrade.

1. Decide on Your Budget

Assess your financial situation to determine how much money you can spend on a car. Keep your car payment under 10% of your monthly take-home pay as a general rule of thumb. Consider the true costs of car ownership, such as insurance, fuel, and maintenance, in addition to the monthly payment.

Calculate how much of a down payment you can afford. If at all possible, put down at least 20%. Every year, cars lose value, so putting down a larger down payment can help you avoid owing more than the car is worth.

Figure out how to save money if you don't have enough money for a down payment for that brilliant custom Land Rover Defender. If you own a car, consider selling it and putting the proceeds toward your down payment. You can either trade the vehicle in or sell it privately. Although trading it in is more convenient, selling a car privately can often result in a higher profit.

To estimate how different prices, loan terms, and down payment amounts will affect your monthly car payments, use online payment calculators at automotive websites such as Edmunds, Autotrader, and Cars.com.

2. Check Your Credit

A good credit score can help you get the best terms and interest rates on auto loans. Auto loan borrowers with the lowest credit scores generally have an average interest rate of 14.85 percent on a new car loan, while those with the highest credit scores have an average interest rate of 4.19 percent. To see how your credit stacks up, check your credit score. If you find any inaccuracies in your credit report, contact the credit bureau.

Take the time to improve your credit score if necessary before looking for a car. Bring any accounts that are past due up to date. Make sure you pay all of your bills on time. Reduce your credit card balances to lower your credit utilization ratio.

3. Get Pre-Approved

You can get a car loan from a dealership, but it isn't your only option for financing a new vehicle. Preapproval for a loan from a third-party lender may result in a lower interest rate and more negotiating power with the dealer.

Banks, credit unions, and online lenders are all good places to look for auto loans. Basic information such as your Social Security number, employment details, financial information, and the amount you want to borrow will be requested. Calculate a rough figure based on the price of the car you want.

4. Settle on a Price

Look into local car dealerships to see how much the car you want is selling for. Negotiate with your chosen dealer using the lowest price you can find, or take the average price and reduce it by 10% to 20% before making an offer.

Extras like an extended warranty, gap insurance, rust-proofing, and window etching will be sold to you by the dealer. Don't give in to peer pressure to buy something you don't need. All of these extras can be purchased later for a lower price, either from the dealer or from third parties.

If you're not happy with the deal, be ready to walk away. There's always a new car and a new dealership to choose from.

Getting a few financial things squared away before you go can make buying your dream car a breeze.

Tagged: car purchase

Four financial considerations when upgrading your car