Financing Tips for First Time Car Buyers
First time car buyers should be prepared not just to choose the ride of their dreams – or the ride their wallet allows – but to provide five items that are essential in order to finance the vehicle.
Without them, buyers will find the process delayed until the items are provided. For the most part, auto loan lenders require proof that you’re a good credit risk and can repay the loan they are offering. Along with the consumers credit report and FICO score, the following information will make a difference in regard to the amount of interest your loan is charged.
Here are the types of documents most lenders require:
1. Proof of income. Proving income usually requires copies of the most recent month pay stubs as well as a total of what has been paid to you year-to-date. Self-employed? Then consumers will need to bring tax returns to see gross income, usually for the past two preceding years. Some lenders may require paperwork signed by an auditor, so it might pay to call ahead just to make sure.
Include proof of income from rentals, legal settlements, alimony, social security, and child support as well. Some lenders won’t require these additional proof of income documents, but this additional information can help either reduce the interest rate or help the consumer qualify for a larger loan.
2. Credit and banking history. This is an important one. Lenders want to know any other outstanding loans or financial obligations such as mortgages, leases, and credit card payments. Bringing a copy of your credit report and recent credit card statements is a good idea; bank statements may also be required, and bringing recent statements along can be helpful in smoothing the car buying or leasing process.
3. Proof of residence. This can be verified with personalized mail – such as a copy of a gas or electric bill, and a mortgage statement or rental agreement.
4. Vehicle information. If you’re seeking financing from a bank or credit union rather than directly at the dealership where vehicle information is provided, you should have the buyers order or dealer sheet with the purchase price, VIN or vehicle identification number, and the cars year, make, and model. For a used car being purchased from a private party, the seller should provide this information along with mileage, disclosure of any liens on the car, and the vehicles original title.
5. Proof of insurance. Many car dealers will not let you drive the car off the lot without proof of insurance. While you have a small time window in which to add a newly purchased car to an insurance policy, or purchase new insurance, from a lending standpoint it is important to come with proof that an insurance company is aware of the new vehicle and the car will be insured adequately.
With this information all in hand, securing a loan for a new or used vehicle, or lease financing should be a much smoother process for consumers.