At nearly two vehicles for every household in the US, it’s clear: Americans buy a lot of cars! But it’s a time-consuming process that shares precious few qualities with the purchase of other commodities. Unlike an iPad or a TV, you can’t just tap your Visa and drive away. There are contracts and registrations, regulations and legal documents, and there are things you need to provide. Do you know what to bring when buying a car? If you don’t, we have answers.
What to bring when buying a car
When you’re buying a car, a bunch of tedious paperwork is required. Why, you ask? There are ownership and legal implications, not to mention the contract you’re going to be signing. There’s no difference between what to bring when buying a used car or a new one.
A vehicle has a vehicle identification number (VIN) that’s permanently assigned to the car. Much of the documentation ties ownership of that vehicle to you when you buy it. Then there’s the proof that you are who you say you are, verification of insurance and so on.
Here’s what is needed to buy a car.
An updated insurance estimate
Any idea what it’s going to cost to insure the vehicle you’re buying? It’s a good plan to have it estimated. Whether you’re retaining your current insurer or choosing a new carrier, use an online insurance calculator to get an idea of how much your new insurance policy may cost.
Your driver’s license
No salesperson will let a buyer drive away with a new car if they don’t have a driver’s license. Not only do you need it to drive, but rest assured you’ll be asked for it for proof of identity for any financing agreement. Technically, you can buy a car with a valid state ID aside from a driver’s license, but you won’t be able to drive it off the lot.
Proof of residency
Where you live might seem like a trivial matter for buying a car, but it has serious implications for how much state tax to charge, not to mention where to send your car loan statements. Usually, a utility bill or credit card statement is all you need in this regard.
Proof of insurance
Again, you can’t drive off the lot if your car isn’t insured; your salesperson can’t allow it. You’ll need to have proof that your current car insurance covers you before taking your vehicle home. If you don’t currently own a car, you can purchase online or over the phone while you’re at the dealership and have proof of insurance faxed or emailed over to the dealer.
It isn’t mandatory to have a loan preapproval when you walk in to buy a car. Maybe you’re one of the select few who’s paying cash, but that’s pretty rare. If you are planning to finance the car, talking to your bank or credit union prior to writing up a purchase agreement is a great idea that can be a bargaining chip to try and secure better terms than the dealer’s captive financing. At minimum, it gives you confidence that you can afford the car regardless of the dealer’s financing application results.
Form of payment
No transfer of ownership will happen until payment has been arranged and completed. If you’re buying the car outright, it means handing over a certified check or stacks of Benjamins. If you’re financing it with your own bank or lender, you’ll need to bring in a check for the full value owed. And if you’re financing with the dealership, your down payment needs to be made and the financing contract completed. This is where the preapproval is so helpful, since it can take several days to get payments in order, delaying the ownership transfer.
Can you buy a car with a credit card?
Maybe your credit card has a better interest rate than the car loan you’ve been offered, or maybe you’re just trying to collect as many rewards points as you can. Paying for a car on a credit card can seem like a good idea, but it might not be possible; at least, not in full. Because dealerships pay merchant fees for credit card transactions, they usually cap it at a certain dollar figure—$1,000, $2,000, or even $5,000. It’s sufficient for down payments. If you’re adamant about paying on a credit card, be prepared to pony up an extra 3% to offset the dealership’s merchant fees.
When you’re preparing to buy a car, you should understand where you stand in terms of credit reporting. It may help you more accurately estimate payments in advance, since you probably should at least have some understanding whether you have prime or subprime credit. If you’re financing at the dealership, the dealership’s finance manager will pull a credit report. Knowing your credit history in advance can help you clean up problem areas and potentially avoid any unpleasant surprises at the dealership. Pull a free credit report annually through each of the three major bureaus (Experian, Equifax, TransUnion), thanks to federal law.
Proof of income
Just stating your income won’t cut it for dealer financing. You’ll need proof. Bring in recent pay stubs from your employer, W-2s or bank statements that show consistent income from verifiable sources. If you’re self-employed, you’ll likely need to bring in two years of tax returns and 1099’s to verify your income.
Though not the norm, some may be asked for references in order to finance a car if you have less than stellar credit. There can be a few reasons for this: The salesperson actually wants character references, they’re mining for additional leads or they’re exploring the possibility of a cosigner to help get your loan approved.
What documents do you need to buy a car if you qualify for discounts or rebates? You shouldn’t need to bring anything, but salespeople may not keep up with the monthly incentive updates. If you qualify for a discount based on your profession or through an organization, bring proof of your membership. If it’s a promotion or discount advertised in a flyer, bring it along. If it’s a manufacturer’s rebate, have it on hand either in print, on a website on your phone or as a screenshot.
What do I need to apply for a car loan?
Having a relationship with your bank might help you get approved for a car loan quickly, but let’s be honest here—almost all car manufacturers offer highly incentivized loan rates that are virtually impossible to beat. You can get yourself preapproved for your loan in advance to make it as smooth as possible, which is offered by such carmakers as Ford.
To get approved for the loan, you’ll need to provide:
- Your Social Security number
- Personal information
- Employment status and income verification
- Your address and proof of residency
- Monthly financial obligations
- The year, make and model of the car you want to buy
Keep in mind that you’ll still need to take delivery from a local dealer. That means you’ll need to bring your down payment and sign the contracts with someone there when you pick up your car.
What do you need to buy a car out of state?
No one locally has the car you want to buy? You’ve heard great things about a dealership across state lines? You can buy a vehicle out of state, but nuances exist that make it a slightly different transaction. Variances in the process are common from state to state, so it’s best to contact your DMV to find out any requirements.
What you need to provide the seller probably isn’t any different. However, you’ll need the title from the seller since you’ll need to transfer it into your name and register it in your home state. Be aware that you might need to pay all of the sales tax or an outstanding balance when you register it. You’ll also need to make sure any state inspections or smog checks are performed or you won’t be able to register it in your home state until they’re done.
As with anything, due diligence is crucial before signing the bill of sale. Running a vehicle history report prior to the purchase may help you prevent falling victim to a cross-border scam like title washing.
What do I need if I’m trading in my car?
What do you need to bring to buy a car when you want to get rid of your current ride? Trading in a car adds another layer of complexity. By using your car as a trade-in, you can lower the taxable portion and get rid of your old car without any headaches. But when you do, make sure you have the right documents with you and ensure your car is ready for its new owner.
A valid title
A dealership won’t—and legally can’t—take your car on trade if you aren’t able to prove you’re the legal owner. Your title needs to be current, and you should be able to produce the original. Most dealerships won’t touch a trade-in that has a branded title aside from sending it to a wholesaler or directly to auction for a fraction of what it’s worth, so consider other sales options if you have a car that’s been a total loss.
If you’ve lost your title, there are no two ways to slice it: You’ll have to get in touch with the DMV to get a new one.
Is your car in the state legally? If it is, then it’s registered, and you’ll have to produce a current vehicle registration to trade the car in. Sometimes the dealership can chase the registration down from the DMV on their own, but it will come at a cost to your trade value if they decide to allow it.
The loan account number
It’s common practice to trade in a car while you’re still making payments on it. It’s totally doable, and dealerships are very familiar with the process. You’ll need to produce the loan information including the lender, the account number and the outstanding balance.
If your car is worth more than the outstanding balance on the car loan, your equity is applied to lower the balance owed on the new car. If you owe more than the car’s value—known as negative equity or “upside down”—it can either be added to your new car’s loan amount or you can pay the negative equity outright.
A clean interior and exterior
If you’re looking for the best price for your trade-in (and why wouldn’t you be?) then you should put your best foot forward. Clean the exterior and interior to help boost your trade value.
- Wash the exterior
- Touch up or polish major scratches
- Repair minor damage that won’t cost you much
- Declutter the interior
- Vacuum the upholstery and carpet
- Clean the windows and vinyl
The idea is simple: eliminate the negatives. If there are fewer visible problems or issues and it looks like you took care of your car, the dealership is likely to pay more for your trade.
The keys and owner’s manual
It’s surprisingly expensive to replace a key for a car today. Keys for modern cars have transponder chips in them, so any unauthorized attempts to start the car will be ineffective. It can cost between $50 and $500 for a new car key and fob if you lose it, and the dealership will lower your trade-in value to compensate for it.
Same goes for an owner’s manual, albeit not for the same value. It’s a pain to get a new owner’s manual for a car and, even though few people ever read it, they expect it to come with a new vehicle purchase. A new owner’s manual is around $25 to $40, but some dealers will cut even more than that from your trade-in value if it’s missing.
Would you pay more for a car if you have the assurance all the maintenance has been performed? So would other car buyers. When you trade in a vehicle, provide any and all service records that you have for it, including maintenance, routine service and minor repairs. If you can provide service records to the dealership when you trade it in, they can reasonably expect to get more money for the car when they sell it, so you can hold your ground for a higher trade-in value, too.