What do you need to buy a car? Follow this checklist

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What do you need to buy a car? Follow this checklist

The most important things you need to buy a car are the following items: your driver’s license, method of downpayment, and proof of car insurance, plus the title, registration and loan information for your trade-in. Buying a car can be a complicated and time-consuming process, but knowing what you need to bring ahead of time will help make things easier. 

If you’re buying a vehicle without trading one in and have good credit, it should be a straightforward process, minus any haggling, of course. But if you’re trading in a vehicle and don’t have the best credit score, the process can be a little more involved. To help you with your car-buying journey, Edmunds explains how your credit score can affect the auto loan you’ll be applying for and what documents are needed to purchase a vehicle at a dealership. 

What documents do you need to buy a car from a dealership?

To make the process quicker and smoother, make sure you have everything listed below. For additional information, check out this guide on what to bring with you when you buy a new car. 

1. Your method of payment: If you were preapproved for a loan by your bank, credit union, or an auto loan company, make sure to bring the check with you. If you’re getting financing from the dealership, bring a check or credit card for the down payment on the loan. Plan on paying the whole amount in cash without a loan? Call the dealership to find out what forms of payment it will take.
2. Your driver’s license: A driver’s license is a must when purchasing a car. It proves your identification for payment and lets the seller know you are legally registered to drive.  
3. Proof of car insurance: To finalize your purchase, dealerships require proof of car insurance. Some dealerships just require you to show proof that you have a current auto insurance policy, but some will require you to set up a new policy on the vehicle you’re purchasing. 

What do you need to bring when you’re trading in a car?

1. Title for your trade-in vehicle: If you are trading in a vehicle and own it, you will need to bring the vehicle’s title to show proof that you are the owner. 
2. Current vehicle registration for trade-in: If you are trading in a vehicle, the dealership will require a copy of the vehicle’s current registration. Make sure the registration is current and that the sticker is on the vehicle. 
3. Account number and payoff amount if you have a trade-in with a loan: If you are trading in a car and have an unpaid loan balance, you’ll need to bring the account number and know the payoff amount so that the dealership can pay off your loan properly. 
4. Rebate eligibility documents: If you want to qualify for a special manufacturer rebate, such as a military or recent college graduate rebate, make sure to bring the documents the dealership needs for the rebate. If you don’t know what documents are needed, it’s best to call the dealership ahead of time.  

What credit score do you need to buy a car?

Your credit score is one of the most important factors when applying for an auto loan. Lenders, including banks, credit unions and auto loan companies, use it to determine if you qualify. It also determines the interest rate you’ll get on your loan. A higher score will increase your chances of getting approved and get you a lower interest rate, which helps lower your monthly payments. However, a lower score might give lenders a reason to deny your loan application and will increase the interest rate if you’re approved. 

There isn’t a set universal minimum credit score required to qualify for an auto loan because lenders typically have their own requirements. But if you want to get approved for a loan with a decent interest rate and a favorable term or the length of the loan, having a credit score of 660 or higher will likely get you there. Certain lenders might approve loans for individuals with scores as low as 500, but the loan will have a high interest rate and less favorable terms. Therefore, it’s important to compare offers from different auto loan lenders if you have a low credit score. Check out this comprehensive guide for more information on what credit score you need to buy a car. 

Credit score basics: A credit score is a number that represents your creditworthiness or how likely you are to repay your loan. The score ranges from 300 to 850. The higher the score you have, the better your creditworthiness is. You can check your credit score online via various credit score websites, but sometimes your bank or credit union can provide it for free. When you apply for an auto loan, you and the lender have access to your credit score.  

A credit score is calculated by using several factors from your credit report. FICO scores are widely used, but Experian, Equifax and TransUnion, which are major credit bureaus, also create credit scores and reports. To give you an idea of how credit scores are calculated, let’s use FICO’s calculation model:  

• Payment history (35%): Your history of making on-time payments on loans and credit cards
• Credit utilization (30%): The ratio of your current credit card balances to your credit limits
• Length of credit history (15%): The age of your credit accounts
• Credit mix (10%): The variety of credit types you have, such as credit cards, auto loans and mortgages
• New credit (10%): Recent applications for new credit and newly opened accounts

Does your credit history also matter?

Besides taking your credit score into account, auto lenders also look at your credit history to determine if they will approve the loan you applied for. A credit history of on-time payments and low credit card balances tells lenders you are less likely to default on the loan, which will improve your chances of getting approved. Conversely, a credit history of missed payments and high credit card balances will decrease your chances of getting approved. Even just a few missed payments can hurt your chances of getting approved for an auto loan. 

If you don’t have a credit history, opening a credit card and making on-time payments is a great way to start building credit. You can also become an authorized user on a family credit card. Taking out other types of loans, such as student or personal loans, will also help. The goal is to show that you are responsible with your credit, which will increase your chances of getting approved for an auto loan. 

Avoid surprises

In addition to checking your credit score regularly to identify any possible errors and to stay informed, Edmunds recommends checking it before purchasing a car to avoid any surprises at the dealership. If you still aren’t sure about the documents needed to purchase a vehicle, calling the dealership ahead of time should clear up any questions you have.

This story was produced by Edmunds and reviewed and distributed by Stacker.