Fifty-four easy payments — that’s all it takes to be behind the set of wheels of your dreams, but before you sign on the dotted line, make sure you are getting the best deal possible.

Most people have to rely on the bank’s money to afford a new car, but all finance is not equal. The single most important thing you can do to ensure you get the best financing deal for your new car is to ask the right questions.

Many dealerships offer what looks like attractive financing options but some creative structuring could end up costing you a lot of money.

Here are some key questions:

What's the interest rate I'm really paying?

The annual percentage rate is the best way to know what interest you are paying. It is the actual interest rate you pay annually on the unpaid balance of the loan.

The rate you are offered will to a large extent depend on your credit profile and your relationship with your bank. Most car finance rates are fluctuating, so if rates go up, so will your payment. So make sure that you can easily afford the instalment.

Are there any possible penalties in my loan?

Does paying the loan off early entail penalties? Are there any other possible extra charges that could occur during the term of my loan, and are there any hidden charges?

Nowadays the best kind of car loan is one where you can pay in extra money to reduce the capital. This can save you a lot in interest charges. Some loans do not give you a reduction of interest even if you pay in extra cash. Make sure that you get a loan that you can settle early without penalties.

What should I do with my old car?

The market, not what you think the vehicle is worth, will set the value of your transportation, be it a trade-in or a private sale.

Conventional wisdom says don't talk about trade-in price until you have settled on a price for the new car. The trade in is part of the dealing process; don't fail to use it to maximum value. The dealer may offer you a good price, but then get some of his money back on your new vehicle financing (they will sometimes get kickbacks from the finance company, the higher the rate, the higher the kickback).

You'll usually get more selling privately, but it can be more of a hassle. Do the same research you'll do for your new car — plus check the classifieds to find out your best asking price.

What about the deposit?

Before you give anyone a deposit on a vehicle, be sure you know whether you can get it back if you change your mind, or is it gone forever? Get the salesman's answer in writing before you hand any money over.

If you are dealing with a private individual who requires a deposit give him a cheque so if anything untoward happens you can stop the payment.

Turn to page two for other points to consider when financing a car...

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