The Important Parts of Your Car Loan Paperwork

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - October 26, 2020

There's a lot of paperwork involved when you’re financing a car, and it can be hard to know what you’re even looking at if you’re unfamiliar with the process, or are a new borrower. We cover the important parts of your auto loan paperwork that you shouldn’t overlook.

The Paperwork of Financing a Vehicle

Once all the fun of finding a lender and choosing the right vehicle is over, it’s time to move on to the paperwork. For many people, all of the documents you go through at a dealer can be daunting.

Some borrowers end up staying at the dealership for hours at a time, just waiting on all the paperwork that everyone needs to sign in order for you to take delivery of your car (aka: take it home).

Being asked to sign a foreign document can be stressful, and, for some, it can be hard to speak up and ask, “What does this mean?”

It’s hard to know what’s right and wrong if you’re not sure what you’re looking at! You don't have to fear looking through that mountain of paperwork associated with a vehicle sale if you know the basics.

Vehicle History and Information

If you’ve found a car that you’d like to finance, do some digging on it. Ask the dealer about the vehicle’s title and history.

When you’re looking at the car’s history and title, make sure everything lines up. For example, check that the vehicle’s identification number (VIN) matches its title. The title can contain information about the last time it was sold, whether or not it still has a loan on it, year/make/model, and possibly more (they vary by state). If the car was ever totaled and deemed a total loss, that should be noted on the title, too. Read through it carefully, and check out the history report to learn what kinds of things the vehicle might have been through, such as accidents.

Once you’ve settled on a car, you can start the financing and buying process.

The Financing Paperwork

Thanks to the Truth in Lending Act, or TILA, the lender is required to give you information about your loan in the form of a disclosure. This truth-in-lending disclosure should show what your interest rate is, how much interest charges you pay during your loan, and give you a chance to look at your payment schedule.

Look for these things courtesy of a TILA disclosure:

  • Your annual percentage interest rate (APR) – This is the cost of borrowing money, and it’s paid to the lender. Most auto loans are simple interest, meaning you’re charged interest on the remaining balance of your loan daily. After each payment, your interest charges decrease. The quicker you pay off the vehicle, the less you pay in interest charges.
  • Amount financed – How much you’re financing.
  • Finance charge – The total amount of interest charges you pay over the course of the loan if every payment is made on time according to the payment schedule.
  • Total of payments – The amount you pay overall (what you really paid for financing the car).

If you don’t see these things listed, consider walking away from the deal.

Other documents on your auto loan can also include important information you should know. If you don’t see anything about the following items, ask the lender up front:

  • Whether or not the lender charges late fees on your vehicle payments.
  • How soon the lender can act on a repossession after a loan default.
  • If your interest rate is fixed or variable. Most car loans have fixed rates, but be on the lookout for a rate that can change.
  • Whether or not you’re penalized for prepaying or completing your auto loan early.

If a lender is hesitant to tell you your interest rate, or answer other questions relating to the terms and conditions of your loan, consider finding another one. Most car loans are anywhere between three to eight years long – so you should know what you’re getting into!

Buyer’s Order

The buyer’s order is prepped by the dealership and has the information about the vehicle itself, and other important things concerning the actual sale. Look through the buyer’s order carefully, and make sure everything is correct. Most times, the dealer draws it up after you’ve agreed on the negotiated selling price of the car.

States and dealerships can vary on what exactly is on the buyer’s order, but they generally have this information listed:

  • Trade-in information – If you have a trade-in, the offer amount and information about the vehicle is shown on the buyer’s order. If you still owe money on your trade-in, the payoff amount is typically listed, too. The offer price and the payoff amount are subtracted, and the remaining balance is deducted from the negotiated selling price of your next car.
  • Dealer’s inventory tax – This has to do with the dealership’s own taxes. This varies by state.
  • Documentary fee – Also called a doc fee, it’s the fee the dealer charges for handling the paperwork. In some states, there’s a cap on how much this can be. In other states, there’s no limit. This amount can sometimes be negotiated, depending on your state, but a dealer may not be willing to budge.
  • Vehicle’s information – The buyer’s order almost always includes information about the car you’re buying, such as the year/make/model, its vehicle identification number, and mileage.
  • Taxes, license, and title fees – These three fees are the only things that can’t be negotiated on when you’re buying a car. Some borrowers pay them up front, and you often have the option of rolling them into your overall financed amount.
  • Down payment – When you put money down on a vehicle, it shows up on the buyer’s order and deducts from the agreed selling price.
  • Total sale price of the car – After the down payment and trade-in equity are deducted from the agreed selling price of the vehicle, you should see the “total due” section near the bottom of the buyer’s order after everything is added and subtracted.

Now that you know what you’re looking at when the dealership hands you a buyer’s order, you can read through the paperwork with some peace of mind. Don’t be afraid to ask your lender and dealer questions about anything. If there’s something you don’t understand, speak up!

The buyer’s order is not your official sales contract – it’s a summary of what you and the dealership have agreed to. Make sure that everything you agreed to in the buyer’s order is in your final sales contract before you sign it.

After the sale is all set and everyone is satisfied, make sure to get copies of everything you signed.

Another quick tip: don’t take possession of the car until everything is signed. This is called “spot delivery.” If you drive away with a vehicle before the paperwork is completed, then something could be changed after you’ve left or you run the risk of having to return the car.

It’s tempting to get behind the wheel of your new ride right away, but it’s not worth the hassle. Be patient, and wait until all paperwork is completed to get those keys.

Feeling Better Prepared for a Car Loan?

While you may be feeling more prepared about the lending and buying paperwork that goes with purchasing a vehicle at a dealer, there are many borrowers that struggle to find a lender for their credit. It’s common for bad credit borrowers to run into issues getting that auto loan approval, but we want to help with that.

Here at CarsDirect, we know which dealerships are signed up with special finance lenders that can assist bad credit borrowers. Our network covers the entire country, so get matched to a dealer in your local area after you complete our free auto loan request form. Let us help you put the fun back into car shopping! We’ll get to work finding you the lending resources you need for your credit.

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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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