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What to Bring When Buying a New Car

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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You researched reliability and value, road tested a few vehicles and checked your credit — you’re ready to drive a new car home. But before you make that last trip to the dealership, you should know what to bring when buying a car. This list of documents you need to buy a car can save you time, money and aggravation.

What do you need to buy a car?

There’s a stack of paperwork that’s part of the process of buying a car. You’ll need to provide several pieces of personal information, particularly if you plan to finance your vehicle through the dealership. Take some time to gather the proper documents to avoid extra trips.

License and proof of insurance

Your current (unexpired) driver’s license proves your identity and clearance to drive one of the dealer’s cars off the lot. Non-citizens may need their passport and visa for identification plus a local driver’s license or international driver’s permit.

You probably already had to show your license to test-drive a car, but the dealer and your financing company will now want to make sure you have auto insurance, too. Your insurance card from a trade-in or other car you own will probably do — insurance companies usually provide a grace period where the new car is covered until you add it to the policy. Do this as quickly as possible once the purchase is complete. You’ll probably have to show proof of insurance for that vehicle when you register it with your state or local government.

Compare rates: If you don’t already have auto insurance, shop around for the best rates before you go to the dealer. Most providers can supply you with temporary proof of insurance if you have the car’s vehicle identification number (VIN).

Form of payment

Whether you’re paying cash for the vehicle or financing it, it’s wise to research your options before you sit down to make the final deal at the dealership. Dealers are allowed to increase your auto loan’s annual percentage rate (APR) for their own profit. The only way to know what rate you deserve is to do your own research about the different payment methods available to you:

Preapproved auto loan

A preapproved auto loan tells you the APR you will get and the length of the loan term. With an offer in hand, you can judge whether the dealer’s options are better (or worse) choices. Plus, if you don’t want to buy from one dealer, you can take your preapproval with you to the next one.

Preapproval vs. prequalification: The preapproval or prequalification process may use what’s called a soft credit check or a hard credit check. A soft check shows what rates you may qualify for without hurting your credit score, but it may not be as accurate as a hard inquiry, which does impact your credit. Ask potential lenders what method they use and remember: you’ll most likely have to go through a hard pull at some point in the car-buying process. Credit bureaus allow a 14-day shopping window where all pulls count as a single inquiry. The drop to your credit score is typically minor and temporary.

A preapproval may come in the form of a blank check that you finalize with the dealer. You’ll take the check to the finance office, where the dealer will fill in the final amount and submit it to the lender. Or, you can go to a bank or credit union branch once you have the final amount.

Dealership financing

To apply for financing at the dealer, you’ll need the same information it takes to apply for a preapproval online including your:

  • Social Security number
  • Proof of income or employment status and history, such as pay stubs, particularly if you’re starting a new job or have a low credit score.
  • Residence status – do you own or rent? You will need to provide the monthly cost of your rent or house payment.

The dealer may ask for references based on your work history or a personal reference from the closest relative that does not live with you. Financing companies will use your Social Security number to check your credit score and credit history.

If you’re self-employed: You may be asked to provide bank statements, canceled checks or tax returns as proof of income. If you’re claiming other income sources such as child support, alimony or retirement income, you’ll need documents to back that up as well.

Personal check

A personal check may be an acceptable form of down payment for a car or to buy a low-cost used car outright. For example, a private seller may be willing to take a personal check.

The dealership may ask you to verify that you have enough money in the account to cover the check. You could call the bank or use the bank’s mobile app to show your account balance. A dealership may prefer a cashier’s check, certified check or money order over a personal check. These types of checks verify there is enough money in the account to guarantee payment.

Credit cards

Dealers are usually reluctant to accept credit cards for the full amount of a car because of the merchant card transaction fees, but you may be able to charge a down payment of a few thousand dollars. There might be an advantage to doing so in the form of reward points and other incentives — for example, American Express cardholders who use its car-buying service are eligible for auto repair and insurance deductible benefits worth up to $2,000.

Credit cards charge high APRs, so unless you are able to pay off your purchase immediately, or have a low promotional rate, be wary of swiping plastic for such a large amount.

Debit cards

Check with your bank on the maximum amount you can purchase with your debit card. It’s usually more than the daily cash withdrawal limit, but may not be enough for a down payment on a new car. You could call your bank to ask for a short-term increase in your normal daily purchase limit. If you want to use your debit card, set things up with your bank ahead of time rather than while you’re sitting in the finance office at the dealership.

Cash

Dealers typically make more money when you finance through them, so they prefer those deals. If you’re thinking of paying with actual currency, keep in mind the dealer must report cash transactions over $10,000 to the IRS. Cash will be more welcomed for a small down payment. Dealers consider cashier’s checks and money orders for the full amount to be cash transactions because there’s no financing involved.

Trade-in information

To trade in your vehicle, you’ll need to bring these essential documents to avoid any delays.

Registration

Must be valid and current.

Title and payoff information

Whether you have the title depends on your state – some states retain the title until a car is paid off; others send you the title with a note that there’s a lienholder.

If the car is paid off, you should have the title or it will be sent to you if you made the final payment within the last few days. Some states send a lien release form that you take to your state’s Department of Motor Vehicles (DMV) or the dealer to get a new title with the finance company’s name removed. At least 19 states track titles and liens electronically so your information is always up to date.

Lost title: If you have lost the title, apply for a duplicate with your state’s DMV. Depending on your state, a dealership acquisition form or a transfer bill of sale may work instead.

Don’t forget to sign over the title: When you own the car with another person, check to see if the title and registration is written with “or” between the names or “and.” If it’s “or,” only one person is required to sign the title. If it’s “and,” both signatures are required, so make sure both of you go to the dealership to avoid delays in the paperwork. When one person isn’t available, you may be able to have them sign a power of attorney giving you permission to sell the car.

The loan payoff is the amount you still owe on your trade-in, unless you’ve paid it off. Bring your loan account information including the payoff amount. You or the dealer may need to call the lender to get the most accurate figure.

Rebate qualifications

If you want to take advantage of dealer rebates and incentives, you may need to verify your military or student status, for example. These types of discounts may be in addition to or in lieu of deals that depend on your credit profile. Be sure to check the manufacturer’s website for the latest offers and eligibility requirements. To get these discounts you usually must use the manufacturer’s finance company.

Active-duty military

You’ll need to verify your status with a military ID and/or your leave and earnings statement, which also can be used to verify income. Some manufacturers are adopting government-approved online services like ID.me to prove your identity. Sign up online and receive a discount certificate to take to the dealer. The discounts are usually available to immediate family members as well.

Retired military or separated from service

Verify your veteran status using a current military or retiree ID card or a DD Form 214, the discharge papers you received when leaving the military.

Graduate/student

Bring a student ID or other documentation to show you’re a current college or graduate student or have graduated from a two- or four-year college within the past two years.

Loyalty/conquest buyers

You may be able to get a discount for staying with the same brand of car, or switching from a direct competitor. In either case, you’ll need to bring proof of ownership and, in some cases, proof of active financing or leasing status.

Buying a car out of state

Many dealers will start the registration process for you even if you live in another state. If they don’t, or if you’re buying from a private seller, you may have to do more of the work to get your new car home and properly registered.

1. Obtain temporary tags

Your new car needs license tags before you take it out on the road. A dealer usually provides a temporary tag, giving you time to register it in your home state. If not, or you’re buying a car from a private seller, you’ll have to go to a local DMV to get one or ship your car home. In a few states, the license tags stay with the car, so you could drive the car home. Be sure to check local regulations before you buy.

2. Register the car

You’ll need to register your new car with your state’s DMV within a specified time period.

To do that, you’ll need some documents, which vary by state and locality. Typically, you’ll need to fill out a vehicle registration application, and an application for a certificate of ownership for bringing in a vehicle from out of state. You may also need:

  • Identification
  • Title or bill of sale or invoice
  • Proof of insurance
  • VIN inspection
  • Safety inspection if required
  • Current odometer reading
  • Emissions certification if required
  • Proof of tax paid via dealer
  • Lien holder information

3. Pay any necessary fees

If you’re buying a car out of state, you should not have to pay that state’s use or property tax. Instead, you’ll pay that in your home state. You’ll also pay registration and license fees to the state as well as any local municipality fees and taxes.

FAQs about what to bring to the car dealership

Do dealerships register cars for you?

One of the advantages of buying from the dealer (versus a private seller) is that most are authorized to issue temporary registration and tags until your permanent ones arrive in the mail. Check with your local DMV to see what dealers can and cannot do in your state.

What documents do you need to buy a car?

At a minimum, you’ll need your driver’s license and proof of auto insurance. If you plan to finance through the dealership, you’ll need to bring the documents proving residence, income and more that we describe above. Bringing your own auto loan offer will make the process faster — your credit union, bank or online lender has already reviewed your paperwork. either in person or online.

Can you take a car home the same day you buy it?

Yes, if you’ve come to the dealership prepared. Otherwise, not having the right documents or signatures could slow down the process.

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How to Get out of a Car Loan (and Get a Better One)

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Reviewed By

We all make mistakes. Maybe you’re struggling to pay your bills, especially your car payment, and looking for a way to get out of that car loan. Or perhaps you’re doing better financially than when you purchased your car and it’s time to refinance into a better loan. No matter how you got into a bad car loan or why you want out of it, you always have options. Understanding those options is the first step to improving your financial situation. Here’s what you should know:

How do I know if I have a bad car loan?

A bad car loan is one that you can’t afford, or that costs you too much money in interest charges. If you’re struggling to make car payments or falling behind on your loan, you’re likely in a bad car loan.

What’s important to realize is that circumstances change. You could have taken out a loan on a new pickup truck while you had a good job and could easily make the payments. When you’re unemployed, however, the truck payments become a huge burden. You may even fall behind.

Another possibility is that you bought a car when you had a thin or damaged credit history, at a high interest rate. A year or two later, when you have a decent credit score, you could do a lot better. A good car loan when you bought the car is a bad car loan now.

If you think you’re in a bad car loan or one that no longer fits your needs, it’s time to start finding ways out of that loan.

6 ways to get out of a bad car loan

The best way to get out of a bad car loan will depend on your situation and goals. Are you trying to get a lower interest rate, get a lower monthly payment or not have car payments at all? If you don’t set clear goals, you could get out of one bad loan only to make your financial situation worse.

Once you know what you want to achieve, you can decide which of these options is best for you:

1. Refinance a car loan

If the problem is that you took out a loan with a high interest rate, either because your credit score was lower or because you didn’t shop around as well as you could have, you should probably refinance your car. Check the latest auto loan refinance rates to compare your rate with lenders’ best offers. Refinancing with a new lender, even if you only improve your rate by a little, means a fresh start with a healthy account.

What’s a good interest rate for a car loan?

“The interest rate you pay should not be higher than what you would pay on a credit card,” said Bruce McClary of the National Foundation for Credit Counseling (NFCC). “I would say any auto loan that carries an interest rate in the 20% range is something you would want to get out of quickly. In the teens, at the high end, you should consider refinancing.”

Check your credit score — scores of 660 or higher qualify for the lowest new auto loan rates, 6.64% or better, on average.

You could also refinance your car loan if you want to change the length of the loan. For example, say you originally took out a three-year loan, but the payments are too high. You might refinance with a four- or five-year loan, instead. Use an auto loan calculator to see how much you could save. Be aware that a longer term means you’ll pay more in interest over the life of the loan. We never recommend an 84-month auto loan.

Refinancing a car is almost always a better financial decision than getting a new car to get out of a car loan. You generally pay a few fees to refinance, but you avoid paying sales tax on a new car, and you avoid the temptation to buy a more expensive car.

2. Renegotiate a car loan

If you just need help getting back on track, or need to make your payments more affordable, try talking to your current lender. It may offer a way to defer a payment or two, giving you some much-needed time to catch up.

Another way it may help is by extending the terms of your loan so your payments are lower. Remember, just like refinancing, when you delay or lengthen your loan, interest charges still accrue. The longer the term, the more total interest you will pay.

3. Pay off a car loan

If you want to get out your car loan without restructuring or refinancing it, look for a way to pay it off or pay it down. You may have savings you could tap, if you can do so without jeopardizing your emergency fund and other goals.

Avoid taking money out of your retirement account. For one thing, you could owe a hefty penalty and taxes to the IRS. For another, retirement funds are for retirement.

You could also sell investments or other vehicles to pay off your loan, or work extra hours. Here are ways to monetize a hobby. Even if all you can do is make extra payments on your principal every month, you will pay off your car loan more quickly and save a significant amount of interest expense.

If you don’t want to keep your car — for example, if your household has two cars and can get along with one — you can sell your car to pay off the loan. You’ll get the best price if you sell your car yourself. Be aware that you need to gain enough from the sale to pay off the loan, or come up with the difference yourself.

4. Trade in a car to get rid of a bad loan

If you need a new car anyway, you could trade in your old car as a down payment on a new one. This way, you get out of your car loan and car. Dealers are motivated to sell you another car, so they’re almost certain to take your old car. They may even take it if you’re upside down or underwater on your current loan — if you owe more than it’s worth — and roll the excess amount you owe into your new loan.

Trading in your car can be a good idea if you are hesitant to try and sell your car yourself, and you need a more reliable or different car.

It is not a good idea for people who might use a bad car loan as an excuse to trade up to a more expensive car that strains their budget and prevents them from ever paying off a car or reaching other financial goals.

Tips for trading in a car: Before you go to the dealership, check your credit score (if there is time, make improvements) and get an auto loan preapproval. The idea is to get a better rate this time around. Don’t just take financing at the dealership without comparison shopping first.

5. Surrender the car to the lender

If you’re in financial trouble and you can’t keep up your car payments, one option is to give up your car. You can drive your car to the lender, or wait for them to come and get it. Either of these options should only be a last resort.

The problem with turning in your car is that it is a “voluntary repossession.” If you owe more on the car than the car is worth and you can’t pay the excess amount (which is likely if you can’t afford your payments), it may harm your credit history and score. You should also be prepared to keep making your car payments until the lender sells the car. Even then, you may be on the hook for the creditor’s expense of selling the car.

Whether you turn in your car voluntarily, or you miss payments and they tow it out of your driveway, the repossession will be reported on your credit report. This means any car loan you get in the near future will likely carry a high-interest rate.

6. File for bankruptcy

If your finances have reached a point where you cannot pay your bills and you don’t see any other way out of debt, you may need to consider filing for bankruptcy. Bankruptcy may help you keep your car, which can be important if you need it to get to work and earn a living.

Filing for bankruptcy doesn’t get you out of a car loan, however. You must continue payments on your car loan to keep your car. However, filing for bankruptcy may give you relief from collection efforts by other creditors, making it easier for you to keep up with your car payments.

Alternatively, you can surrender your car in bankruptcy. You may be able to keep it until the bankruptcy is finalized.

Don’t forget about the long-term consequences

It’s tempting to think about short-term fixes to financial problems. And getting through this month and the next is important. Try to choose a path that lowers your interest expense and total debt, if possible. Avoid decisions that can harm your credit history. Your long-term financial health depends on taking a longer-term view as you decide on the best way to get out of your car loan.

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Why Do Car Dealers Want You to Finance Through Them?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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Car dealers want you to finance through them because they often have the opportunity to make a profit by increasing the annual percentage rate (APR) on customers’ auto loans. But they also have relationships with multiple lenders and car manufacturers. One application at the dealership means you could receive many options, including manufacturer incentives. In other words, don’t count out the dealer — instead, use dealership financing to your advantage. Here’s how.

What is dealer financing?

When you submit an auto loan application form at a dealership, the dealer sends your application to finance companies it partners with, typically large lenders and local credit unions. The lenders send responses back to the dealership where a finance manager views them and presents an offer to you. The thing is, as the middleman, the dealer likely will show the best option for them, not you.

How dealers get paid by lenders

For example, Lender A offers a 4% APR and Lender B offers a 5% APR. These are the “buy rates,” the minimum APRs the lenders would charge you for the car you want. As a reward for sending them business, Lender A offers a small “flat” or finder’s fee to the dealer. But Lender B allows the dealer to increase the APR up to a 7% “contract rate.” That’s the rate the dealer presents to you. If you agree to the 7% APR contract rate, the 2 percentage point difference, or points, goes into the dealer’s pocket.

We explain flats and points in more detail below:

Flats: A flat fee given to a dealer, usually based on a tiered system. For example, if your auto loan is $10,000 or less, the lender might pay the dealer $50. If your loan is between $10,000 and $20,000, the lender might pay the dealer $100 and so on.

Points: The difference between the buy rate and contract rate. The buy rate is the minimum APR the lender will charge. The contract rate is the maximum APR the lender will allow the dealer to charge. The difference between the buy rate and the contract rate is the profit the dealer makes from marking up your APR.

How to know what auto loan terms you deserve

The best way to avoid a dealership markup is to get your own preapproved auto loan — ideally, more than one — from a few lenders of your choice before you go to the dealership.

An auto loan preapproval is typically a firm offer by a lender to a specific person (or people if you have a cosigner) for a certain amount of money. To apply, you should know roughly how much you want to borrow, for how long and whether you want a new or used car. You do not typically need to know the exact car or the exact amount. Auto loan preapprovals usually last 30 days. If you decide not to take the offer, you don’t have to do anything — it will expire on its own.

APR

As low as
2.49%

Terms

24 To 84

months

Fees

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

Disclosure

LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple, auto loan offers within minutes. Everything is done online. LendingTree is not a lender, but their service connects you with up to five offers from auto loan lenders based on your creditworthiness.


Advertised rate is for new and used auto loans for an offered loan amount of $10,000 with a 36 month term.

Preapproval vs. pre-qualification
The lender performs a hard credit pull when you apply for a preapproval, just as it would when you officially apply for a loan. Once you decide on a vehicle, the final terms you receive from the lender should look the same or very similar to the preapproval, depending on the vehicle you choose. A prequalification only needs a soft pull and is thus considered a “soft offer”; the final auto loan terms could be very different once you do a full auto loan application.

How multiple applications affect your credit 
If you do all applications within a 14-day window, applying to as many lenders as you want will not hurt your credit score any more than applying to one lender would. The credit bureaus give this window so consumers may comparison shop for loans without undue penalty.

Use dealer financing to your advantage

Dealerships won’t make any money off your preapproved auto loan and while it may feel nice to “stick it to the man” and not allow the dealership to run your credit, you could use the dealer’s desire to make money to your advantage.

Allow the dealer to send your auto loan application to its lender network and see what offers you get. If the dealer comes back with Lender B’s 7% APR from our earlier example, whip out the offer you have in your back pocket and say, “Lender C already approved me for a 5% APR loan. Can you beat that?”

Forced with the choice of making no profit versus a little profit, the dealer might then “suddenly discover” that Lender A offered you a 4% APR.

Here are the documents you’ll need to bring to the dealership to get the car-buying process underway.

Is it better to finance a car through a dealer or bank?

A reason you may not want to take a finance offer you get through a dealership, even if it is lower than your own preapproved offer, is if you have a lender preference. Maybe the lender with the lower APR offer has a reputation for bad customer service or doesn’t have local branches and you prefer to make your car payments in person. You might even prefer the convenience of having your auto loan at the same place where you bank.

Dealership financing vs. in-house financing

In-house financing at a dealership is when the dealer is also the lender. Financing a car this way is usually only offered to customers who cannot get a loan from other lenders due to bad credit or no credit and the APRs offered are often at the maximum allowed by state law. You could learn more on how to get an auto loan with bad credit or no credit.

7 steps for buying a car

It’s a best practice to get a car before you really need one. If you need to buy a car within a day, you’ll probably feel a lot of pressure and might take the first deal that comes along. Start the car buying process about a month before you know you’ll need one, if possible.

  1. Figure out how much car you can afford. Use an auto loan calculator first so you don’t spend hours researching a car only to find out it’s $100 a month too much. Cars are more expensive than their sticker price as you will have to add taxes, fees and auto insurance into your budget.
  2. Do your research. Before filling out any type of auto loan application, you should know in general what type of auto loan you want (used or new) and about how much you want to borrow for how long. If you’re having trouble deciding, these car-buying sites might help.
  3. Get preapproved. Potential lenders could include your credit union, bank or an online lender.
  4. Decide on a car and negotiate the price. The price for the car you want to buy shouldn’t be more than what industry guides such as NADA and Kelley Blue Book say it’s worth.
  5. Negotiate a trade-in price separately. If you have a trade-in vehicle, negotiate the price the same way you would for the new car you’re buying — the dealership should not pay you any less than what an industry guide says it’s worth.
  6. Talk finance after all prices are set. Allow the dealer to put your loan application out to their partner lenders. Ask the dealer to beat the loan offer you already received.
  7. Finish the paperwork. Follow through with any paperwork such as documents you may need to provide to the lender and the dealership finance manager.