You've done your research, checked your credit reports to make sure they're accurate, and you're ready to get serious about buying a car. You feel more than ready to sign on the dotted line and drive home in your new ride.
It could happen. Or, you could drive home in your old vehicle, kicking yourself for having forgotten one of the documents you need to finalize the purchase. Here's how to lay the groundwork for getting the deal done on the day you're ready to buy.
First, you'll want to talk to your insurance agent about what it will cost to insure the make and model you are considering buying. You don't want that figure to be a surprise, and you also want to find out how soon you will need to notify your insurer you have the new vehicle.
Second — and do this close to your planned purchase date — talk to your bank or credit union and get preapproved for the loan you'll need. You may get something resembling a blank check (up to a certain maximum) that must be signed by you and the dealer. By getting preapproved, you will know the total loan amount and interest rate you qualify for. Even if you plan to finance at the dealer, it cannot hurt to come in with a preapproval; you are far less likely to agree to a longer term or higher interest rate because you really want to drive that new car home today. It can also help you stay within your budget by serving as a solid reminder of how much you planned to spend and how long you were willing to make payments — before the showroom floor made it so hard to remember.
Be cautious about having your credit pulled unnecessarily. Each inquiry made for the purpose of extending credit can cause a small, temporary decrease in your credit score. And while inquiries for the purpose of getting a car loan made in a two-week period should count as only one entry, we've heard from consumers who have told us their credit scores dropped as the result of multiple auto loan inquiries. Some dealerships now ask customers to fill out a credit application even before a test drive, and there are reports that some have checked credit without customer consent. It can help to keep an eye on your credit through this process for this reason. You can get a credit report summary and two credit scores, updated monthly for free on Credit.com, to track your standing.
Third, make sure you have your driver's license and proof of auto insurance with you. You shouldn't be driving without these documents anyway.
And, obvious as this seems, be sure you have a way of funding your down payment. If it's not cash, make sure the dealer accepts the form of payment you're planning to use. (If you forget to do this, you would not be the first, but that would be little consolation.)
Planning to Trade Yours In?
If you plan to trade in a car, you have a bit more to do.
You will need your car's certificate of title (if it has gone missing, your state department of motor vehicles can tell you how to get it replaced), the car's current registration, all your car keys and the owner's manual. If you still have a loan on the car, you will need to have your account number or a payment stub. (We're going to hope that if this is the case, your car is worth more than you owe.) And you should clean out your car, paying special attention to areas out of sight but convenient for stashing things: under seats, over the visors, in the glovebox and in every corner of the trunk.
Besides a new car, expect to come home with a good bit of paperwork. Pay special attention to the purchase and sale agreement. You will need the information there to update or get insurance — and you might even need it at tax time next year, if you bought a car that qualifies for a tax credit.
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