Auto Loans

As a general rule, it makes good financial sense to purchase a car and keep it for five or more years. However, depending on your circumstances, leasing may be a better option.

• Need to keep your monthly payments within a tight budget
• Are able to limit your driving to 10,000 to 15,000 miles per year
• Don't have a car to trade in or the cash for a down payment
• Are reasonably confident in your ability to return the car in excellent condition
• Prefer to drive a new car every few years

• Have a long commute or enjoy spontaneous trips
• Are more likely to incur damage beyond normal wear and tear to the car
• Have the cash or trade-in value to make a substantial down payment
• Would like to have the freedom to modify your car
• Can envision keeping and maintaining your car for five years or longer

Even though your lender will pull your credit score, it's a good idea to review your credit reports in advance. You can get free credit reports at AnnualCreditReport.com (opens in a new tab).

Bear in mind that a less than stellar credit history will not automatically disqualify you from getting a loan, but you may pay a higher interest rate. Another option is to consider signing with a co-applicant.

By preparing your information ahead of time, you can help simplify the loan process, save time and prevent unnecessary complications. Most lenders will request the following information and documentation for you and any co-applicants:

• You'll be asked for your basic personal information in order to start your application for a vehicle loan. This includes your date of birth, Social Security number, contact information and home address.
• You'll need to provide previous addresses if you've lived less than three years at your current address. Depending on your circumstances, you may need to show proof of your residence, such as a utility bill or canceled rent check.

• You'll need to know the details about the vehicle you're buying, starting with the year, make and model. Then you'll provide the mileage and purchase price.
• You'll need to get the Vehicle Identification Number (VIN) from the seller and your proof of insurance from your insurance company.

• You'll be asked about your occupation in order to determine your ability to repay your loan. You'll provide the name of your employer, length of employment with them, and their contact information. In some cases you might also need to include this information for previous employers.
• You'll also list your gross monthly income and proof of income, such as a pay stub or tax forms.

• You'll need to list your bank account and routing numbers to complete the financial picture for your lender. They'll often ask for bank statements for the past two months, as well as proof of your rent or mortgage payments.
• You'll have to provide a list of your lenders and loan amounts for any debts. Finally, you'll want to disclose any other financial obligations such as alimony or child support.

If possible, secure your auto loan before you start shopping. This frees you to negotiate solely on the price of the vehicle and helps you avoid the trap of an "affordable" monthly payment that may end up costing considerably more in the long run.