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What to Bring When Buying a Car: 8 Documents to Have

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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On top of the normal stress of buying a vehicle, there’s the aggravation that comes from not having all of the paperwork you might need. The last thing you want is to make more trips to the dealership. To help you save time, money and some sweat, we made a list to check off before you hit the lot.

1. Proof of identity

This one seems like a no-brainer and it often is. If you’re a U.S. citizen with a current (unexpired) driver’s license, you’re usually good to go. But if you want to or need to use other documents to buy a car, here’s what you could use depending on your situation.

U.S. citizens: Most federal and state-issued identification that includes a photo of you, such as passports and state ID cards, should suffice. Military ID badges, however, are not acceptable as proof of identity because making a photocopy of them is illegal.

Non-U.S. citizens: You’ll have to bring your passport and visa when buying a car. The passport serves as your identification document. The visa shows you are legally allowed to be in the U.S. for a period of time. If you want to finance a vehicle with a U.S. lender, the lender will want evidence that you are allowed to stay in the country for at least the entire duration of the loan. So if your U.S. work visa is for 60 months, but you want a loan for 72 months, the loan probably will not be approved. In this example, you might have to get a loan for a 60-month term or shorter, which may mean you need a less expensive car.

To prove that you may legally drive on public roads, you usually need an international driver’s permit or a local driver’s license.

Do you need a driver’s license? Technically you could buy a vehicle without a driver’s license, but you couldn’t legally drive it, get auto insurance for it (required by lenders if you are financing the car) or register it in your name. Generally, you must provide your driver’s license, not necessarily as proof of identity, but as proof you can legally drive. The dealership will require you show your license before you even take a vehicle on a test-drive.

There is, of course, the obvious loophole: if you’re not going to drive the vehicle, it isn’t an issue. If you are a cosigner for a person who does have a license and you’re not going to drive the vehicle at all, then you don’t have to worry about having your own driver’s license. A couple examples for this situation include a grandparent who can no longer drive but cosigns for a grandchild or a disabled person buying a vehicle that their caretaker will drive for them.

2. Proof of income

Not all lenders will require proof of income, but you’re more likely to need it if you have a new job or have multiple sources of income. They want to make sure you’ll be able to not only cover your new car payment but also still be able to make rent. How little or how much proof you’ll need to submit depends on how you get your income.

Proof of income for primary job(s). Perhaps the most convenient thing for you to take as proof of income for your primary job(s) is your tax form, your W-2 or W-4. If that’s not available, then what will probably suffice is three months of pay stubs. The pay stubs should show the total amount you’re paid before taxes and the total amount you actually receive (after taxes, benefits and any other deductions).

Proof of income if you’re self-employed. If you don’t have an employer-provided tax form or pay stubs because you work for yourself, or you’re a freelancer or a contractor, the best things to bring are your 1099 tax form and at least three months of personal bank statements showing income being deposited into your account. Any work contracts showing you will have gainful employment for a set time, such as a year-long contract to develop a website, could be useful as well.

Proof of income if you’re going to start a job. If you’re not employed yet or you’re changing jobs and want your potential lender to consider your future income as a reason you can afford the new car, then bring your job offer letter. It should show the employer’s name and contact information, your name, future start date, annual income and any bonuses being offered. Many lenders will want to verify the offer with the future employer. Many lenders require that this starting date is no more than 90 days out from when you sign the financing contract for the car.

Multiple sources of income. You do not have to prove every single source and amount of income you earn. You only have to report it if you want the lender to take this other income into consideration. For example, if you earn $30,000 a year from your job, but you also receive $10,000 a year from Social Security, alimony, pension, child support, stock dividends etc., that’s a lot of money that could help you afford your car payment.

The more you are able to make your loan payments, the less risky it is for the lender to lend you the money. This translates more likely getting a loan and having better loan term. So if you have a significant amount of income from other sources, consider including it in your auto loan application.

To prove these sources of income, you may have to provide a couple of different documents in addition to bank statements. The second type of documentation depends on the type of income source.

  • Social Security. The award letter from the government showing the amount you receive and how often you receive it.
  • Pension. A letter showing that you are to receive a specified amount from a pension fund managing company, the start date and for how long it will continue. It may be that it continues for the rest of your life or until you reach a certain age.
  • Interest and dividends. The issuer of these should provide an income statement showing how much and when you receive it.
  • Child support or alimony. A signed court order showing the amount that is to be paid to you and the dates you’re going to receive the payments.

If you have any questions specific to your situation, you could also ask the lender directly or a dealership finance manager.

3. Proof of residence

You’re most likely to need this if you recently moved. The address you provided on the loan application should be your residential address — where you actually live. Most lenders will not accept a P.O. box or a business address as your primary address.

The most commonly accepted forms for proof of residence are utility bills such as electricity, water and gas. You usually only need one utility bill as proof. But if the utility bills aren’t in your name, then a medical bill or tax bill, bank statement, lease or mortgage contract, driver’s license, cellphone bill or several pieces of business mail (or junk mail) may work, depending on the lender.

If you absolutely need to receive mail at an address that is not your residential address, you can specify that your mailing address is different from your residential address. Specifying this may be an option during the process of buying the car, or you may need to contact the lender afterward to add to your personal preferences.

4. Current vehicle registration (for trade-in)

To trade in a vehicle, you have to prove you have the right to do so. If you have the current vehicle registration in hand and only in your name, you’re good to go in most cases. This applies if you go to a dealership to get your new car, no matter whether you still owe money on the vehicle or you own the car outright.

Do you need to bring the title? If you own the vehicle (you paid off the loan or you paid for it in cash), then you should have a title and it’s best to bring it in order to avoid delays in paperwork processing. But if you lost it, you could fill out a form that’s called “lost title” or “request for title”(provided by the dealership or your state’s DMV site) and may be able to trade in the car with that form instead of the title, as long as you have the current vehicle registration.

What’s a payoff instead of a title? If you owe money on the trade-in, you don’t have a title. In this case, you’ll need a payoff statement, which shows how much money it costs to pay off the entire vehicle loan at once, at an exact date. You do not have to worry about getting this yourself if you go to a dealership. At a dealer, your salesperson can get a payoff quote from your lender (which is listed on the vehicle registration) and take it from there.

If you are buying a car from a private seller, you might have to do more work. If you need a loan to buy the car from the private seller, the lender may call and get the payoff amount for you and apply that amount into your new loan, or you may have to call yourself to find the amount and tell your new lender what it is.

If the trade-in isn’t yours. In the case that the car you want to trade in isn’t yours, you need to have the owner sign off, saying that they give you the right to trade it in and they acknowledge they won’t have a right to the new car. Some places require that the owner go to the dealership, show their ID and do this in person. If the owner lives in a different state, the same paperwork applies and can be sent to them, but they will probably have to have it notarized.

If there is another name on the vehicle registration or title. If your name is on the paperwork for the trade-in along with someone else’s, you might have to get them to sign off on the transaction. Because their name is on the paperwork, they’re technically part owner. Depending on the state, you may not be able to sell or trade it without their permission.

To find out whether your state requires consent from both owners before you can sell or trade a vehicle, visit your state’s Department of Motor Vehicles website or ask a manager at a dealership. If it is required, follow the steps in the section above to get permission from another person.

5. Method of payment

Whether you’re giving a small down payment or paying for the whole vehicle at once, here are some notes on what to bring when buying a car in the way of money and funds.

Credit or debit cards. Do bring your card and don’t forget your PIN number (if you have one). Also, don’t be surprised if the transaction is declined if you didn’t warn the card company about a large purchase in advance. Call your credit card company or bank (if it’s a debit card) ahead of time to let them know you’re giving a vehicle down payment and you may need a one-time or a one-day increase to your normal daily credit or debit limit. It’s easier to do this ahead of time instead of when you’re in the finance office at the dealership.

Cash. Bring large bills for faster processing and expect a dealership manager to count it in front of you and check for counterfeit currency.

Check. For exceptionally large personal checks, the dealership finance manager may call your financial institution to ensure fund availability. Some dealers have a third-party check processing company that guarantees checks. If the dealership can’t verify funds, they may ask for a different form of payment.

A dealer’s check. If you already accepted a loan offer directly from a lender, the lender may give you a blank check (with a maximum limit on it) for you to use to buy a vehicle. After you strike a deal and sign the paperwork to buy the car, you’ll give the dealer’s check to the finance manager who will fill it out and send it to the lender with the other paperwork. Your loan will be finalized when the lender pays the dealer.

6. Rebate qualification documents

If you want a rebate, you usually need to bring appropriate documents showing you qualify. Here are three common car rebates and the documents to take with you to show you meet the requirements.

  • Military. Bring the appropriate document pertaining to your current military status:
    Active duty: Bring your Leave and Earnings Statement (LES).
    Retired or separated from service: Bring your DD-214 discharge papers.
    Again, military ID badges are not acceptable. If you want to receive the discount because your spouse or household member served, not you, they will need to come with you and bring their LES or DD-214 and proof of their relationship with you such as a marriage license or proof of residence.
  • Grad/Student. Your diploma showing you graduated or transcript papers showing your soon-to-be graduation are generally accepted. You may also need to have proof of income.
  • Conquest/Loyalty. Bring the vehicle registration or title of the car that shows either a competitor brand and model (for the conquest rebate) or the same brand (for the loyalty rebate) to prove that you (or someone in your household) currently owns it. If the car is not registered to a household member, you may have to prove that you live at the same address with proof of residence for each of you.

7. Knowledge of your credit and banking history

The following things aren’t required papers to bring with you but should at least be familiar knowledge when making a major purchaser. If you want to bring a copy of any of these for your own reference, feel free.

Credit history. When the lender does a hard pull on your credit, they will receive a copy of your credit history. You don’t need to provide one to the lender. You should, however, know your credit score (you could check it at LendingTree) and what’s on your credit history report. Both are important when shopping for a car loan because they impact the type of loan offer you receive. (LendingTree owns MagnifyMoney.)

Dealerships are usually able to make money by increasing the auto loan APR above what the lender charges. And to convince you that you deserve a higher APR, they might point out places where your credit history is lacking. If you have your own copy of your credit history and a preapproval from another lender, you’ll have a better idea of the rate you deserve.

Banking history. Usually, if a lender asks for bank statements, they want them as proof of income or proof of assets. Unless you know you need these, it’s not recommended to bring them. It would be good, however, to know how to get into your bank account from another computer, so you could print bank statements at the dealership if later deemed necessary.

Asset amounts. How much you have in your savings or investment accounts isn’t just a good way to show off that you manage money well, it’s also a way for the lender to confirm that if you don’t make your car payments, you have liquid assets the lender can take instead. You would only likely need these documents to buy a car if you have a lot of current debt on your credit history.

8. An auto loan preapproval

Because dealerships can make money by increasing your auto loan APR above what the lender charges, we highly recommend you get an auto loan preapproval from your bank, credit union or online lender before you step foot into a dealership.

A preapproval will tell you the APR you can get, the amount you can borrow and how long or short your loan can be. You’re not tied to any one dealership, either. If you don’t like the dealership, you can leave and take your preapproval with you. It doesn’t hurt your credit to apply for a few preapprovals or a few auto loans any more than it would to apply for one — if you do your applications within a 14-day window.

So if a salesperson offers you a 5% APR loan and you have a 2% APR preapproval in your pocket, your life just got easier. You can read more about the benefits of getting a preapproved auto loan here.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jenn Jones
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Jenn Jones is a writer at MagnifyMoney. You can email Jenn at [email protected]

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How to Get a Car Loan with Bad Credit

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Have bad credit? Not to worry, there are plenty of opportunities to get an auto loan, even with a less-than-stellar credit history. Finding a reputable lender offering good terms can be tricky, though. With a low credit score, you’ll likely pay a higher interest rate and there could be extra fees. Here’s what you need to know about choosing a car loan when you have bad credit.

How to tell if you have bad credit

If you’ve applied for credit cards or a loan and been denied, there may be a problem with your credit. A subprime credit score generally falls below 669, according to the credit reporting bureau, Experian. With a FICO score below this level you may not be eligible for credit products with the lowest interest rates and fees.

The FICO credit score ranges are as follows:

  • 800-850: Excellent
  • 740-799: Very Good
  • 670-739: Good
  • 580-669: Fair
  • 300-559: Poor

Every lender has its own approval criteria. There are many factors in addition to your FICO score that go into the loan approval process, including debt-to-income ratio, your employment status, and whether you have an established relationship with the lending institution where you are applying for the loan.

If you have bad credit there are a variety of outcomes that could happen when you apply for an auto loan:

  • Your application may be denied. If you are denied for credit, the lender has to provide you notice in writing that explains the reasons for the denial. Federal law entitles you to a free copy of the credit report the lender used to make their decision.
  • The lender may require you to provide a large down payment or get a cosigner to be approved for an auto loan.

It’s important to know your rights if you think you have bad credit. You are entitled to a free copy of your credit report from each of the three major credit reporting agencies once every 12 months. Visit annualcreditrreport.com to see what’s in your credit file. If you have accounts in collections, judgments, repossessions, foreclosures, or late payments, your credit suffers.

What you may not know is that lenders from different industries use different versions of your credit score to assess your creditworthiness. Auto lenders, in particular, pay special attention to your payment history on other auto loans.

Auto lenders look at your FICO Auto Scores which are different from your simple FICO score. It begins with your base FICO score. This is the score that you see when you check your credit.

In addition to the base score, auto lenders also look at how likely you are to pay back an auto loan, based on your previous vehicle debt history. The FICO Auto Score gives lenders information like:

  • Late payments on previous or current auto loans
  • Repossessed vehicles
  • Personal bankruptcy that included car loans
  • Collections on auto loans
  • Auto loans or leases you have paid off and settled

FICO Auto scores range from around 250-900.

Unfortunately, your free credit report doesn’t provide FICO credit scores that auto lenders use to determine whether they’ll approve your application. For access to FICO Auto Scores, you’ll need to purchase a different report called the FICO Auto Scores for $59.85. You should choose FICO Auto Score options 2,4,5,8, or 9 to get a clear idea of what auto lenders see on your report.

Types of auto financing loans for those with bad credit

Most car buyers require some sort of financing to purchase a vehicle. Before shopping for a car, carefully explore your options for financing so you can get the best possible interest rate and terms.

Credit unions and banks: Most banks can offer you a preapproval without being a member there, but you’ll need to be a member of most credit unions to get preapproved for a loan. If you are already a member or have a relationship with a bank, check with them to find out if they offer auto loans for bad credit. They may have programs to help their credit-challenged customers and since you already have a relationship there, they may be able to help you find a better deal. You can also comparison shop rates at other banks and credit unions. You can check out a list of recommended auto loans and banks, here.

Lenders that offer financing for those with bad credit include USAA and Navy Federal Credit Union. Capital One and Exeter Finance offer subprime loans as well.

Dealers: Many dealerships work with car shoppers who have less-than-great credit. It’s smart to go into a dealership’s finance and insurance (F&I) office armed with other financing options so you can negotiate the best possible loan terms. Talk with the F&I manager about manufacturer incentives, discounts, and rebates that could help lower the price of the vehicle.

Finance specialists at car dealerships may inflate the value of a vehicle to help subprime borrowers get approved. They also may add percentage points to the interest rate offered by the financing company in exchange for a kickback of part of that extra profit. This is known as a “markup.” While it’s technically legal, it’s a grey area and you should pay close attention if you think that a dealer is marking up your rates or value. It’s important to seek preapproval and research financing options separate from a dealership to maximize your options. Negotiating the terms of your loan is just as important as negotiating the price of your car.

Online lenders: Shopping around online can be a good way to find a better auto loan rate when you have bad credit. Be sure to limit the timeframe to less than one month, though. Each time a lender pulls your credit they can choose to do a hard or soft inquiry. Hard inquiries can lower your credit rating further while soft inquiries do not. There are many online lenders specializing in auto loans for bad credit, so pay close attention to the fine print to get the best deal and protect your credit.

Online lenders like RoadLoans offer loans for subprime borrowers.

Subprime auto financing companies: Be especially cautious when exploring this option. This type of lender may offer to finance 125% of the car’s market value, meaning borrowers will immediately owe much more for their car than it’s worth. High-interest rates, prepayment penalties, and origination fees can drive the debt up even further. Subprime auto lenders like Westlake Financial offer these kinds of loans.

Use an auto loan calculator to determine how much money you can spend on a new or used car. It will help you incorporate important details like sales tax, title and registration fees, and your trade-in value.

Five tips for securing financing with bad credit:

  1. Preapproved loan: Getting preapproved for a car loan online will give you leverage at a car dealership and make shopping for your vehicle simpler. You’ll know your interest rate and terms and can determine whether you can afford the monthly payments plus ongoing costs of ownership like insurance, maintenance, and registration fees.
  2. Consider a cosigner: If you are sure you can afford the payments and you have a cosigner with good credit willing to take the risk of adding their name to your debt, you may have a chance of getting an auto loan with better terms by applying with a cosigner.
  3. Pay in cash or part cash/part credit: If you have the cash to buy a car outright, doing so could save you hundreds, if not thousands of dollars in fees and interest. Making a large down payment may also help you negotiate a better interest rate on your auto loan.
  4. Negotiate with the dealer: Once you get preapproved for an auto loan you can negotiate better loan terms with the dealer and get them to compete for your business. They may have some flexibility with the interest rate or terms of the loan, so bring your preapproval document and ask if they can match or beat that offer.
  5. Wait to buy and build your credit: If waiting is an option and you can put off purchasing a vehicle for a few months, do so. Bring past due accounts up to date and make all payments, on time, going forward. If possible, reduce your total credit utilization to below 30% of your total available credit across all of your cards to increase your credit score.

How to rebuild your credit

While bad credit won’t necessarily keep you from getting a car loan, you’ll pay less in fees and get a lower interest rate if you work to rebuild your credit before applying for an auto loan. There are certain things you can do even while you look for financing that will help you improve your credit scores.

Your payment history is a crucial part of your overall credit picture. Make sure you pay your credit card bills and make all loan payments on time every month. Over time, making every payment on time will improve your credit score.

Credit utilization ratio on revolving accounts is the percentage of available credit across all credit cards that you’ve used. According to MyFICO, this number determines 30% of your credit score.

Reducing your credit utilization ratio by paying down your credit card balances to less than 30% of your total available credit across all your revolving charge accounts will help your credit score in a shorter amount of time. Credit card companies typically report to the credit bureaus once each month, so it may take a few weeks for you to see your new lower balances reflected on your credit reports.

Check your credit. Get in the habit of getting your free credit reports from each agency and check them carefully for mistakes. Removing inaccuracies could help raise your FICO scores.

Register for Experian Boost to see if your bank participates in this program. You may be able to raise your Experian credit scores by allowing the credit reporting bureau to access information about your payment history with utilities, rent and your phone bill.

Consider a secured credit card. If you need to build a positive payment history, consider getting a secured credit card. This type of credit card works to help people who don’t have a credit history or who have had past credit problems build a positive payment history with the credit bureaus. Applicants are required to provide collateral in the form of a cash deposit. The credit limit of the card equals the amount of the deposit. The card works just like a regular credit card. Secured cards charge interest on purchases, like any other credit card.

Look for one that doesn’t charge an annual fee and transitions to an unsecured account automatically after a set amount of time when you make all payments before their due date. With a good payment history, the bank may increase your credit limit on a secured card without requiring an additional deposit.

The Capital One® Secured Mastercard® has a low refundable security deposit of $49, $99, or $200. The DCU Visa® Platinum Secured Credit Card has a lower APR than most secured cards at 13.75% Variable.

Make on-time payments. After you get auto financing, be sure to make every auto loan payment before the due date. This will help you avoid late fees and penalties and it will boost your credit scores over time, making it easier for you to get approved for low interest and low fee credit products in the future. This type of loan will also help add diversity to your credit file, which helps boost your credit scores.

What is the best auto financing option for you?

Unfortunately, there isn’t a one-size-fits-all answer for auto financing when you have bad credit. While credit challenges don’t typically prevent someone with a steady income from getting financing, it’s crucial to consider the total price of the car including financing costs to determine whether you can afford to buy a new or used vehicle, or whether you can afford the lease payment on the car you want.

Use an auto loan calculator to help evaluate various scenarios. Proceed with caution. Not every bad credit auto financing offer is in the best interests of the borrower. In fact, many drive consumers with credit problems deeper into debt and cause further harm to their credit scores.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rachel Morey
Rachel Morey |

Rachel Morey is a writer at MagnifyMoney. You can email Rachel here

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Seven Steps for Getting a Great First Car

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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When it’s finally time to buy your first car, you’re likely going to be excited about being behind the wheel of your new ride, but also a bit uneasy. After all, buying a car can be complicated. How do you know which car to get? Will it fit into your budget? Should it be new or used? How do you make sure you’re not paying too much?

Here are seven steps to follow to ensure that you’re getting the best vehicle you can without going broke, whether you’re buying a new or used car or from a dealership or individual.

The most important thing to remember is to take your time, says Brian Moody, executive editor of the car buying and selling website Autotrader. “This isn’t something you should do in one day,” he said. Remember, if a dealer or individual pressures you to make a decision, you can always go elsewhere.

1) Figure out how much car you can afford.

When purchasing your first car (or any car for that matter) it’s always smart to follow the 20/4/10 rule. That means you should put at least 20% down, finance it for no more than four years, and keep your monthly vehicle expenses, including the monthly payment and insurance, at just 10% of your net income, advises Bruce McClary, vice president of communications for the National Foundation for Credit Counseling (NFCC). Ronald Montoya, senior consumer advice editor for the automotive website Edmunds.com, says it’s still reasonable if you put down as little as 10% and go for a five-year loan, although he calls the 20/4/10 rule “ideal.”

Beyond that, examine your monthly net income and expenses to figure how much you’re comfortable paying on a loan while still having something left over to put into savings.

Next you need to figure out what your credit report and FICO score looks like. You can pull one free credit report every 12 months by going to annualcreditreport.com. Once you have an idea of what kind of information lenders will see on your credit report and you’re sure it’s accurate, check your credit score with the major credit bureaus like Experian, TransUnion and Equifax. Unfortunately, getting your credit score is not free so you will need to pay to access it.

One thing to note, auto lenders use more than just your FICO credit score to determine whether or not you are worthy of a loan. You want to pull your FICO Auto score to see exactly what lenders will use when you apply for an auto loan. Doing this work ahead of time will give you more leverage when it comes down to the negotiating process and make you a more informed consumer.

Once you have a good understanding of your credit report and credit score, examine current new and used-car loan rates for loans of up to four or five years. Longer term loans, while popular for their lower monthly payments, generally have higher finance charges. When coupled with little or no down payment, they increase the risk that you could be upside down on the loan at the end of the term. This means that you could owe more to the lender than your car will be worth on the market. One additional factor to consider when you are upside down on a car loan, is that if the car is stolen or severely damaged, your insurer may not cover what you owe to the bank.

To get an accurate interest rate estimate, you’ll need to know your credit score. If you don’t, there are many ways to get it for free, though you will need to pay to access your auto credit score. Once you have compared rates and know how much you can afford to pay monthly, you can use a specialized online loan calculator like this one to figure out how much you can borrow. Just enter the interest rate, number of months and monthly payment.

You also can explore your loan options with local and online lenders. Montoya from Edmunds recommends getting preapproved for an auto loan, which can save you time and money once you’re ready to buy. McClary from the NFCC recommends that you don’t overextend yourself financially. “There’s this tendency to go for the max and to get the most out of what you can qualify for in the financing. You have to resist that temptation,” he said.

2) Research a vehicle.

There are lots of online resources to assist you in choosing a car, among them Autotrader, Cars.com, Consumer Reports, Edmunds.com and TrueCar. Depending on the site, you’ll find car reviews by professionals and owners, road test results and prices for both new and used vehicles. Many car sites also show you actual new and used vehicles for sale. All of this will help you find a reliable, top-rated new or used vehicle that fits into your price range.

To find the right vehicle for you it’s important to be practical about your needs. “You want to think about how you will be using the car most of the time,” Montoya said. He says that you shouldn’t pay extra for a vehicle that’s too big or has features you don’t need. Remember to look at gas mileage, reliability and safety. Also examine the duration and scope any warranty coverage, which, in the case of a used car, you should verify is transferable to a new owner.

When deciding whether you should buy a new or used car, consider that used cars can save you a lot. The average used car transaction price is just over $20,000, compared to $36,000 for new vehicles, according to Edmunds.com. But with a used car, you’ll likely spend more on maintenance and repairs, especially if there’s no warranty.

Once you’ve settled on a few models, you can research them more carefully and compare them. If you’re buying new, check the manufacturer’s website for the various trims and equipment options. While there, look at the latest incentives, including rebates and low-interest financing.

3) Locate a car.

Now that you’ve narrowed your choices, you can locate a vehicle to test drive by visiting local dealers and checking websites such as Autotrader, Edmunds.com, and TrueCar. These sites show you vehicles in your area and can help you narrow your search. You’ll also find used cars being advertised by individuals on Craigslist and elsewhere. For first-time buyers it’s easiest to purchase through a dealer, who likely will have inspected the vehicle and done some reconditioning, say Montoya. Consider shopping first at a franchised dealer, one that sells the same model new since they will be experts in keeping their model of used cars in tip-top shape.

One caveat to keep in mind about buying a used car from a dealership is that you could end up costing you a bit more than it would if you bought a used car from an individual. That’s especially true if you opt for a certified used vehicle, also known as a CPO, or certified pre-owned vehicle. These usually come with a service contract and an extended warranty that covers the cost of some repairs. Car pricing websites such as Kelley Blue Book can show you how prices differ among private sale, dealer and dealer-certified used vehicles.

4) Check out the car.

The best way to assess a vehicle is to take it for a test-drive, preferably on roads you know, advises Moody. How does it feel? Is it quiet? Are the seats comfortable? What about the visibility? How easy is it to use the car’s infotainment system, a common feature in today’s vehicles. There’s a lot to consider, so take your time. “You can’t make a $30,000 decision in 15 minutes,” Moody said.

If you are looking at buying a used car, you also should inspect the vehicle carefully inside and out. There are many online resources, including at Consumer Reports and YourMechanic and our own checklist, that explain what to look for. It’s a good idea to bring someone (who knows about cars and car buying) and ask about the car’s history, including whether it’s ever been in an accident and, in the case of a dealer, whether it was a trade-in, auction purchase, returned lease or anything else.

Once you have narrowed your choice down to one or two specific vehicles, you should run a VIN check and vehicle history report on the chosen cars, to check if there are any hidden issues.

Ask for a Carfax or Experian AutoCheck vehicle history report, which can tell you if the car has been in an accident, stolen, repurchased under a state lemon law program and more. Some dealers post history reports with their car ads.

If you are buying a car from a private party, ask the seller for a history report, or get the VIN number of the vehicle and order one yourself. If the seller supplies a report, consider contacting Carfax or Experian by chat or email to verify it hasn’t been altered.

As an extra precaution, there are two other types of history reports you can request on your own, the free VINCheck report from the National Insurance Crime Bureau and another from the federal National Motor Vehicle Title Information System, which is available at no charge from yet another buying website, Carsforsale.com.

Be warned, history reports can miss a lot, so you’ll need to have the vehicle inspected by an independent mechanic who should check not only for mechanical issues but for body work and other signs the car has been an accident, flood or other mishap, says Rosemary Shahan, president of the California-based Consumers for Auto Reliability and Safety. She recommends it for certified used cars that supposedly have gone through a multi-point check, too. Expect to pay $100 or more for a thorough inspection, and ask for a written inspection report.

Before moving forward with a final decision on which car to buy, call several insurance companies to find out how much it will cost to insure the vehicle, including collision and comprehensive coverage if you’re buying a new car or if it is being financed.

5) Negotiate the deal.

Once you’ve settled on a particular new or used car and taken a test drive, it’s time to negotiate the price. If you’re buying from a dealer, he’ll likely ask you how much you want to spend each month. “I like to tell them zero,” said McClary. He says the dealer’s goal is to divert your attention from vehicle price so you’ll end up paying more than you otherwise would. One common mistake, especially among first-time car buyers, he says, is assuming that because a payment fits into their budget, it’s a good deal. For a new car, the negotiations will include the cost of any added options.

To negotiate like a pro, you should be well-informed. First, visit several car pricing sites, such as TrueCar, Edmunds, Kelley Blue Book, and NADAGuides, to find a good price based on the exact model, trim line, add-on options and, in the case of a used vehicle, the condition and number of miles on the odometer.

When negotiating a new car, contact several dealers and get “out-the-door” cost quotes for the vehicle you want. This means that you get a total cost including any extras, add-on options and warranties. Once you have a few numbers, you can play the dealers against each other to get the price lower. Fortunately, you can do that by phone, text or email, so you won’t have to do a lot of running around.

Comparing prices for a used car is more difficult because there likely aren’t others that are exactly the same as the one you’re considering. “You want to find other cars that are close to it,” said Montoya. If you can’t get a price that you think is fair, it may be time to consider another model, make or a different used car.

This is also the time to get the car checked out by a mechanic of your choosing. For a used car, make sure any agreement is contingent on a thorough inspection by your own mechanic, which should be completed before you sign.

If you’re buying from a dealership, you’ll likely be offered add-ons such as paint protection, rustproofing and undercoating for a new car, or an extended warranty for a used one. Many add-ons aren’t necessary. Some add-ons you can buy for much less outside the dealership, and you won’t have to pay finance charges on them as you would if you included them in the deal, says Montoya. Extended warranties can be a bad value and unnecessary, especially if you’re buying a reliable car and take care of it as the manufacturer recommends. Along with carmaker plans, many dealers sell expensive coverage from independent companies. Those plans often have many fine-print exclusions and may be difficult to use, so be wary.

6) Decide on financing.

Unless you can pay cash, you need to decide how you’ll finance the vehicle. For a private sale, you’ll be using the loan you’ve already researched with a lender. With a dealership, you’ll have an additional option to choose dealer financing or, in the case of a new car and some certified-used vehicles, special low-interest financing from the manufacturer.

Remember that dealers often mark up their best rates, so be prepared to negotiate the rate as well as the car price. Since you did your homework prior to shopping you will be well-equipped to make a good financing decision.

If you’re considering manufacturer financing, find out whether it’s in lieu of a cash rebate. If it is, figure out whether you’d come out ahead by opting for the rebate and then financing at a competitive rate elsewhere. Compare the total costs both ways. You can use an online low-APR versus cash back calculator to help you do the math.

Another financing option is leasing. You can lease a new or used car (in limited cases). A lease is attractive because you can get the same vehicle for a much lower monthly payment than with an equivalent loan, though you don’t own the vehicle at the end of the lease. “You can get in a cycle of just throwing money away,” said McClary. Leases also have fees, restrictions on the number of miles you can drive and finance charges that are higher than those of an equivalent loan, among other drawbacks. Be sure to check for any unresolved safety recalls on the vehicle, new or used. A dealer that sells that make of car can address them for free.

7) Verify the deal.

Get everything in writing, including anything that a dealer has promised to do after the purchase. Be sure that any agreed-to-recall repairs are included in the paperwork before you sign. When leaving a deposit with a dealer, use a credit card. That way, if the deal sale doesn’t go through as promised, you can contest the charge with your card issuer.

For a used vehicle, insist on seeing the title and ensure that all the information listed checks out. With a private sale, you’ll need it to register the car once you take possession of it. Your lender can advise you. A dealer will typically register the car for you.

When it’s time to pick up your car, do a final walk-around inspection before accepting delivery. If it’s a new car that has been ordered for you or that you otherwise haven’t driven, says Moody, consider taking a test drive just to make sure everything is okay.

By following these seven steps, you can be sure you will find a great deal on a great first car.

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Anthony Giorgianni
Anthony Giorgianni |

Anthony Giorgianni is a writer at MagnifyMoney. You can email Anthony here

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