Buying a car, especially a second-hand car, seems to involve a lot of paperwork, which scares many people as they don’t know where to start. In actual fact, the task is not that hard, provided you have a clear idea what papers you and your car dealer should prepare for the purchase transaction. By familiarising yourself with the short list of documents in this article, you will be able to go through the documentation part of the deal easily and without trouble. You should keep in mind, however, that short though the list may be, all the documents on it are extremely important.
Your credit record
It is a good idea, before you even start looking for a car, to check and obtain a copy of your annual credit report, in order to see if it is good enough and decide how you can improve it in case it isn’t. You will also need your FICO score, which is a numerical expression of your solvency. It is calculated from various events in your financial history, like your debt burden and the types of credits you have taken in your past, among others. Paying all your bills on time and closing your debts to the lenders with the highest annual percentage rates will help you increase your score.
You might need your credit report and your FICO score especially if you don’t have money to make a down payment. It is becoming increasingly popular these days for car shops to offer deals without initial installments, as a way of attracting potential buyers. But although some rare car dealers will offer you to buy used cars with no down payment even if you have a bad or no credit record, most of them do want to see a good credit report. As a rule, they will require your FICO score to be 658 or higher before they negotiate such deals.
The best organizations to apply for a credit score are Experian, Equifax and TransUnion. They may be quite pricey though, but virtually all reputable car dealers will provide you with your credit record upon your request free of charge. If your dealer refuses to do it, you may consider it to be a bad sign.
The vehicle history report
This is another extremely valuable document as it can tell you a lot about the ex-owner of the car as well as its inspection, registration and its traffic accident history, and it will even contain information about the type of environment the car has been driven in. These data will help you make up on your mind on whether you would like to purchase the car in the first place, and if you decide to buy it after all, what price you should negotiate with the car dealer.
AutoCheck and Carfax are the best sites to apply for a vehicle history report, and you can do it with the vehicle’s identification number (VIN), but most reputable car dealers will provide it for you upon your request for free.
Driving license and insurance policy
On the day you actually go to the car shop to complete the purchase transaction, you will need your driving license and your insurance policy in order to prove that you can legally drive the car. You will also have to have your ID with you so that the car dealer can make sure that the license and the policy are indeed yours.
Of course, these documents are not necessary for you to actually buy the car, but you will need them to be able to drive the car out of the shop. And since setting up a car insurance is not an instant procedure, many car dealers will agree to issue a temporary insurance for you for an additional fee, which will be valid for a few days until you get a proper one.
The car title
The most important document related to the actual purchase transaction is the car title, which is a formal contract between you and your car dealer, and it must include:
- both parties’ signatures;
- the price of sales and the proof of payment signed by both parties;
- the date of purchase transaction;
- the state sales tax;
- the documentation and registration fees;
- an odometer reading.
Finally, the contract should be notarized. If you are not sure you can complete the car title on your own, you may contact your local DMV, and they will help you.
The bill of sale
Even if it isn’t mandatory in your state, it is still a good idea to complete a bill of sale and to download a copy of it from the DMV website afterwards. The bill of sale should contain the following information:
- the price of the car and the date of purchase transaction;
- the Vehicle Identification Number (VIN);
- the car’s registration number, year, make, model, mileage and other basic specifications;
- both parties’ names, addresses and signatures.
You can use all these papers to register your car at the DMV and let it pass their safety inspection, and some car dealers will even offer to do it for you.
No Objection Certificate
Finally, even though it is not actually mandatory, the NOC is an extremely important document for a purchase of a second-hand car. The No Objection Certificate is the ex-owner’s declaration that all the payments and charges associated with the car have been cleared, and you are not to be held responsible for any of them. Once you get this paper, you no longer have to worry that something may have been concealed from the law, or that some legal issues could still be in dispute, as you have been cleared by the NOS of anything that might arise.
The paperwork required for purchasing a second-hand car may seem overwhelming at first. Nevertheless, you can make it a lot more hassle-free if you know which papers are necessary for the transaction. Read through the list of documents in this article, write down a simple checklist that you will go through to make sure you’ve got it all right, and prepare yourself for the best part of the car shopping, which is the test drive.