Thousands of people buy new cars each year by getting a loan to pay for it. For a person with good credit and a sizable down payment getting a car loan is simple.
Step one, Go to the dealer. The exact dealer is unimportant however licensed dealers usually have contracts with banks. The insurance, auto loan, and title can all be filled out in the offices without the buyer having to do more than make the down payment and drive away.
Step two. Pick out a car. Before applying for an auto loan the buyer should test drive the car and make absolutely certain it will meet all of their needs.
Step three: Contracts and paper work. There is a lot of paperwork when buying a new car. The bank will need signatures accepting responsibility for repayment, to file a lean against the title, to get a copy of the proof of insurance, and to run a credit check on the primary account holder. The paperwork may seem a bit excessive but it covers both the bank and the customer.
A person with no credit or bad credit will need a cosigner with a good credit score in order to get a loan.
For someone buying from a used car dealer it gets complicated. Since the insurance company, the bank, and the revenue office are not connected it’s up to the buyer to go between the companies to get all the paperwork taken care of. If the car is bought it’s great but if one of the companies causes problems it can delay the purchase for days or weeks.
The first step is to discuss with the dealer the intention to buy so they don’t sell the vehicle while the customer is running between companies. Then the buyer must talk to a loan officer in the bank to get the preliminary paper work started. This is when they check the value of the vehicle, compare that to the asking price, do the credit check on the customer, and start drawing up the contracts. If it all goes through the bank will ask for the proof of insurance on the vehicle.
In order to get the proof of insurance you have to have the vehicle’s VIN number and there may be other requirements depending on what state the insurance is being purchased in.
Once the vehicle is insured take the proof of insurance to the bank. Another bad point at this point you have already paid the first insurance payment on the vehicle. If something happens and the loan doesn’t go through the customer has just put insurance on a vehicle they can’t buy.
After getting all the paper work and the loan approved the bank will then have to contact the dealer in order for them to sign off on the title and for the bank to put in the lean against it. The best way to handle all of this is for the dealer and the buyer to go to the bank together with the title to start with but some dealers, especially less than honest ones will try to get out of doing any actual leg work themselves.
Remember before getting a loan to be sure you can afford the terms and understand everything that you are agreeing to pay. Banks make their money from interest. If a loan is paid off early they won’t get that so in the contract there will be a penalty for paying off the loan early. Knowing all of the terms and conditions of the loan will prevent the customer from paying more for their vehicle than they actually agreed to.