How to Buy a Car from the Dealership

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.

Four Steps to Prepare to Buy a Car

Step 1:

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.

Step 2:

Talk to your bank or credit union and get pre-approved for the loan you’ll need—and do this close to your planned purchase date. You may get something resembling a blank check (up to a certain maximum) that must be signed by you and the dealer. By getting pre-approved, you will know the total loan amount and interest rate you qualify for. Even if you plan to finance at the dealer, it can’t hurt to come in with a pre-approval; 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.

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Step 3:

Make sure you have your driver’s license and proof of auto insurance with you. You shouldn’t be driving without these documents anyway.

Step 4:

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.)

Expert Tip: 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. Hard inquiries into your credit require permission, and it can be illegal for your credit to be pulled without your approval in this manner. You can get a credit report summary and two credit scores, updated monthly for free on Credit.com, to track your standing.

Can You Purchase a Car with a Credit Card?

Speaking of your down payment, you may have wondered if this can be charged to a credit card — or if the entire car can be paid that way. The answer is yes and no. It is possible that the dealership will not accept a credit card payment for the car, as this can come with large merchant fees that lower their profits. However, if your credit is in good standing, then it is still possible.

A better option would be to use your credit card for just the down payment. Not only is this better for your credit, since using all of your available $10,000–$15,000 credit limit can damage your credit score, but it’s more likely to be accepted by the dealer.

Finally, you’ll want to use a credit card that has excellent benefits. An appropriate credit card can earn you big rewards on your car purchase or other auto-related purchases. We have given you a couple examples of worthy rewards cards below.

Planning to Trade In Your Car? Don’t Forget These Items for the Dealership

If you plan to trade in a car, you have a bit more to do.

You will need to bring the following items to the dealership:

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
Your car keys and the owner’s manual
Your account number or a payment stub if you still have a car loan (We’re going to hope that if this is the case, your car is worth more than you owe.)
A clean 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 get or update your insurance — and you might even need it at tax time next year if you bought a car that qualifies for a tax credit.

What Do I Need to Apply for an Auto Loan?

While you won’t need to drive all the way to a dealership to get an auto loan (you can simply apply online), you will still need some important documents in front of you to easily fill out the application.

What do you need?

Proof of identity through an ID or passport
Your credit report, which the lender can pull using your name, address, date of birth and social security number
A valid state-issued driver’s license
Proof of monthly income through pay stubs or social security income receipts
Proof of residence through mortgage statements or utility bills
Contact information for personal references (note: this may not be required)
Vehicle make and model
Proof of car insurance
Payment type (cash, credit, debit, etc.)
Your car’s registration if you are trading in the vehicle

The list is rather long, but having each document will speed up the process and prevent you from going back and forth between your files.

Get Your Auto Loan and Car with the Help of Credit.com

Make sure that you can qualify for an auto loan by checking your free credit score, provided through Experian. From there, you can apply for your auto loan with confidence and compare credit cards that can help you finance your new car.

Frequently Asked Questions

Will my credit rating affect my auto insurance rates?

You should choose auto insurance coverage based on your credit rating and overall coverage needs. Check out Credit.com for car insurance quotes and to compare rates.

How can I find a credit card with a low interest rate to charge my car purchase?

We don’t recommend that you put your entire purchase onto your credit card, but there are cards with low APR or no APR for up to 15 months available to compare. If you can pay off the remaining balance during this period, then these credit cards may be for you.

How good should my credit be to get a credit card that is appropriate for a car purchase?

Many of the best rewards credit cards with high credit limits require good or excellent credit. A good credit score is considered 700–749 and anything over 750 is considered excellent.

You mentioned that hard inquiries can affect my credit score. What is a hard inquiry?

A hard inquiry is a credit check that indicates you have applied for credit, usually through a loan. Each time a hard inquiry is pulled from a different lender, your credit score can drop by up to 10 points, because it indicates that a lender has reviewed your credit and that you are trying to open up a new line of credit.

Note: At publishing time, the Chase Sapphire Preferred® Card and American Express Green card are offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for this card. This content is not provided by the card issuer(s). Any opinions expressed are those of Credit.com alone, and have not been reviewed, approved or otherwise endorsed by the issuer(s).

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.