Get a good deal by doing your research and preparation.
General Information
It is rare for people to have the cash up front needed to purchase a car. Exploring financing options is typically the first step to buying a car. Knowing the basics and understanding the factors around financing a car will help you get a loan that you can afford.
Credit History
Before you start shopping for a car, find out your credit history and credit score. Review your credit report for accuracy and have the score with you when you talk to banks and lenders. Your credit score (which is a “grade” of your history of handling money, bills, and credit) will determine interest rates and what financing options are available to you.
Shop Around
Your credit history will impact the loan amount and interest rate that a bank or lender will provide. By researching used car interest rates ahead of time, you are informed on what a current good rate is when you are talking to lenders. To get the best interest rate, contact different lenders such as banks, credit unions and car dealerships. Connect with the bank you regularly do business with first. Since they have a relationship with you, they often are easier to work with than other lenders. This may allow you to negotiate the terms of your loan before applying.
Be careful financing through a dealership - their interest rates can be higher than banks and credit unions.
Applying for a Loan
Once you have gathered all of your information, you can schedule an appointment with the lending institution of your choice. Bring the documentation items listed below:
- Your last four paystubs
- Last year’s W2s or tax returns
- A photo ID (Identification) card
- Down payment, if needed
Fill out all of the loan application paperwork and provide the documentation required. Your lending institution will not be able to process your request until they have all of the paperwork. Sometimes you will get a response the same day, but often it will take a couple days to process all of your information.
Resources
You can visit www.creditkarma.com to access your credit report for free.
Kelley Blue Book has a list of 5 Smart Steps to Purchasing a Car at www.kbb.com.
Federal Deposit Insurance Corporation (FDIC) has information on financing a car at www.FDIC.gov.