How can I get a car loan?

You've found your dream car and can't wait to get behind the wheel. Now, you have to figure out how to pay for it. Most car shoppers may need to finance the purchase. That's when you borrow money and pay it back over time, usually with interest, to purchase a new or used vehicle.

Understanding how to get a car loan ahead of time can help you find the best auto loan option for your financial situation.

Check your credit score

This plays a key role in the interest rate you'll pay for your auto loan. A high credit score can help you get a low interest rate on your loan and save you money.

Research the lender you’d like to finance your vehicle with 

If you're buying a used car, there may be restrictions on used car loans, including limits on the age of the vehicle and/or the mileage. Check with your dealership or lender for more information.

Check for incentives and rebates

While doing your financing research, you may want to check into any incentives or rebates that may be available to you. Dealers may offer a variety of incentives to make a deal more attractive, while manufacturers might offer rebates to boost sales or reward loyalty. It’s a good idea to ask what incentives or rebates are available for the make and model of vehicle you've chosen.

Get prequalified for an auto loan

Financing a car can seem confusing, so consider prequalifying for a car loan to get an idea of how much you can borrow. To make things even easier, arrive at the dealership with the “money issue” already underway by applying for financing ahead of time. Some lenders allow you to apply online and show up at the dealer with financing in hand.

Use your loan offer to set a budget

How much can you realistically afford to spend each month without straining your budget? It's important to remember that your monthly costs will include more than the car payment you make to your lender. You can calculate your monthly car payment  amount using one of the many online calculators available. You’ll want to add estimated costs for insurance, maintenance, gas, yearly registration renewal and miscellaneous items to the estimated monthly car payment to arrive at your total “cost to own.”

Be thinking about a down payment: 

This may be required by your lender, and opting to make a larger down payment may get you a lower interest rate and monthly payment. Even if the dealer provides “no down payment” offers, if you have the funds, a down payment may be your best choice in the long run.

Be prepared with required documents and paperwork

Buying a car typically requires a bit of paperwork, including several personal documents from you. Having the documents required for a car loan can help you finish your financing more quickly:

• Proof of identity: A photo ID with your signature on it. Your driver’s license, government identification or a passport are typically acceptable documents. Check with your lender or dealership to see which they prefer.
• Proof of insurance: Dealers may ask you for proof of insurance before you purchase and take out a loan on your new or used vehicle. You can contact insurance companies from the dealership when you buy your car, or get details lined up with the insurance provider before purchasing the vehicle.
• In some cases, you'll need proof of residence: A driver's license is typically acceptable.
• If you're trading in another vehicle as part of your financing, you should probably have your registration papers for your current vehicle.
• In some cases you'll need to prove that you have a steady source of income, usually through several months of pay stubs or W-2 forms. Some lenders may also call your employer for verification.

In summary

Once you’ve found your dream car, there are ways to streamline the purchase process. Having all required documents available can help accelerate the finance process, and getting financing lined up before heading to the dealership lets you know how much you can spend, and saves time. Now that you understand the basics of financing a car, you'll feel confident and ready to choose the best deal for your budget.