How To Buy A Car: 3 Simple Steps To A Competitive Car Loan
Are you ready to buy a car? Whether you’re thinking about getting a sports car for yourself or a van for the family, you’ll probably need to get a loan to pay for some of the cost. In fact, about 43% of all adults in the U.S. have an auto loan for their current car. Whether it's new car financing you're looking for or used car financing incentive, use this 3-step cheat sheet to help.
(And if these three steps aren't enough, feel free to hop over and download our free comprehensive eBook Guide: Happy Car Buying: Your Ultimate Guide For Getting the Best Deal.)
How To Buy A Car Step 1: Find out your credit score before you apply for a loan
Half the battle of figuring out how to buy a car comes in the preparation stage. A big factor in the type of loan you can get and how much you’ll pay in interest depends on your credit score. That’s why it makes sense to see your credit report as soon as you can.
Did you know you can get a free copy of your credit report once a year from the three big credit reporting agencies by going to www.annualcreditreport.com? You can check your credit report for mistakes and ask for them to be corrected since errors can lower your credit score.
How To Buy A Car Step 2: Figure out how much of a loan you can really afford
Some people focus only on how much they can afford to pay each month for a loan. However, you also need to think about insurance, registration fees, repairs, and gas. It’s a good idea to fill out a budget worksheet using our free budgeting template to figure out what’s a realistic auto loan payment for you.
How To Buy A Car Step 3: Get your paperwork together
Before applying for a loan, you should gather the right paperwork so you can get approved faster. A lender, such as a credit union, wants to see if you can pay back the car loan and that you’re a good risk. Here’s a checklist of items you’ll have to show a lender:
Proof of your income. Bring recent paycheck stubs showing how much you’ve made so far this year. If you’re self-employed, you can show your latest tax returns for proof of your income. If you have other income, such as a rental, alimony, or a legal settlement, have paperwork showing these sources.
- Information about the vehicle. Bring a buyer’s order or a dealer sheet if you’re getting a new car. Or, if you’re buying a used car, have information such as the vehicle identification number (VIN), year, make, mileage, purchase price, and the title. Learn more about how to buy a used car.
- Proof of residence. Have documentation showing where you live, such as a mortgage statement or a utility bill.
- Your credit and financial info. This includes records of payments you’ve made, such as credit card statements, mortgage or rental agreements, or child support. If you have other loans or debts, the lender may need to know about them.
- Proof of auto insurance. You need to show that you have the required coverage with an insurer for the car.
By following these preparation tips for how to buy a car, you’ll be in the driver’s seat of your new vehicle in no time.
Rates, terms, and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. All loans subject to approval.