What Do You Need To Buy A Car
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.
I am David, economist, originally from Britain, and studied in Germany and Canada. I am now living in the United States. I have a house in Ontario, but I actually never go. I wrote some books about sovereign debt, and mortgage loans. I am currently retired and dedicate most of my time to fishing. There were many topics in personal finances that have currently changed and other that I have never published before. So now in Business Finance, I found the opportunity to do so. Please let me know in the comments section which are your thoughts. Thank you and have a happy reading.