What to Expect When Financing a Vehicle
It's easy to get carried away in the excitement of buying your next vehicle. The new car smell and variety of available options are just a few things that make the process so exciting. However, there can be certain complications involved when it comes to financing that may seem daunting at first.
That's why we've included this list of steps you can take to help prepare you for the financing process. Here at Toyota of Dothan, we know that staying informed is one of the best ways to ensure peace of mind when you buy a car. Keep reading to learn more about this step in the car-buying process.
What to do beforehand.
One of the most important things you should do before financing your vehicle is find out the status of your credit score. The better your credit score, the higher chance you have of qualifying for a lower interest rate.
You'll want to do your homework on what sort of interest rates to aim for. Being informed on interest rates that other institutions can provide you will help with the negotiation process. Getting pre-approved can also help you save time during the purchasing process.
Additionally, it's important for you to find out what you can afford. It's helpful to do this with your credit score in mind so that you can stay within your preferred budget.
What you need to bring with you.
There are four primary documents you need to bring with you when purchasing a vehicle.
1. Proof of income
Be sure to bring copies of your pay stubs from last month as well as what you've been paid to-date the past year.
2. Credit and banking history
This would include any information about other outstanding loans or financial obligations you may have, as well as how you've fared in the past financially. These could be mortgage or lease agreements, alimony or child support payments, credit card statements or bank statements.
3. Proof of residence
Personalized mail or your mortgage statement are usually enough to provide reasonable proof of residence.
4. Proof of insurance
Your lender will require proof that your insurance company is aware of your newly purchased vehicle and that it's properly insured.
If you aren't financing with the dealership, you will also want to bring along proof of your loan.
Know what determines the loan terms.
A typical auto loan lasts between three to five years. Your lender will run a credit check and ask you income-based questions. Your interest rate will be determined based on how secure the lender perceives your finances to be. If you have a better credit score, manageable debt, a good standing with your insurer and a high income, you'll likely qualify for a lower interest rate. If not, you can plan what your monthly payments will be with a higher interest rate and try to make it as manageable as possible.