What documents do you need to finance a car?

Like all loans, lenders require you to provide documentation when you apply for vehicle financing. This typically includes information about your income and debts as well as the vehicle you want to finance and your insurance coverage. 

That said, lenders won’t make you submit every piece of information just to get preapproval for an auto loan. For many, it is enough to provide the basics about yourself and your finances. Once you have preapproval, you can use it to guide your shopping and negotiating at the dealership. 

To make the process seamless, organize your documents ahead of applying for an auto loan.

Proof of income and employment

Lenders need to verify your income, assets, employment, debts and expenses to ensure you are able to pay for an auto loan. Most will allow you to submit digital copies, so having well-labeled files that are ready to upload can speed things up if you want to apply with multiple lenders. 

Proof of income can take many forms, including:

• Pay stubs.
• W-2s.
• Tax returns.
• Bank statements.
• Investment earnings.

Your lender will look at your total documented income, available cash and credit history when determining your loan amount and rates. You won’t necessarily need to be employed, but you may need to provide additional documentation that you can cover monthly payments.

When assessing your income, lenders may also review your debt-to-income (DTI) ratio. Your DTI is your total monthly debt payments divided by your monthly gross income. This helps provide a snapshot of how much you can reasonably afford. If your debt level is already too high compared to your income, lenders may not be willing to extend financing. 

What should self-employed borrowers provide as proof of income?

You will still need to show proof of employment if you are self-employed — usually in the form of a tax return. You may be able to present 1099 forms, bank statements or current profit and loss statements.

Proof of address

Lenders will ask for proof of your address, which is typically any official or legal document that also includes your name. Your lender will specify what proof it accepts, but utility bills, bank statements and recently postmarked mail are common options. Lenders may also consider pay stubs or a copy of your lease or rental agreement if you have one.

Your address is important because it not only confirms your identity, but it also affects the sales tax you pay when you purchase a vehicle. This tax is assessed based on the state where you live, not the state in which the vehicle is purchased. If you plan to finance sales tax with your auto loan, the state you live in will determine how much more money you need to finance your purchase.

Proof of insurance

You may be required to provide proof of insurance when you apply, although it may not be necessary during the initial preapproval process. When you are finalizing your purchase and officially borrowing money, you will need to provide proof of liability insurance. Some lenders may also require proof of collision and comprehensive insurance as well.

This is to ensure you can repair or replace the car in the event of an accident. Your proof of insurance should include your name, the insurance company name, NAIC number and your policy number.

Personal details

Each time you apply for a loan, you will have to supply detailed information about yourself, including your: 

• Name and previous names, if applicable.
• Date of birth.
• Social Security number.
• Address.
• Phone number.

This information is used to confirm your identity and to check your credit score — either as a hard or soft credit pull. There is no specific credit score required to purchase a car, but lenders may have their own requirements. Often lenders look for a score of at least 600 in order to offer a competitive interest rate on a loan, but there are some lenders that offer bad credit auto loans. To qualify for the most competitive auto loan rates, you will need good to excellent credit. This is because your credit score is considered a reflection of how likely you are to repay a loan.

Vehicle information

When you are at the dealership and ready to buy a car, your lender will need to confirm that the vehicle you plan to purchase qualifies for financing. The specific details required by your lender may vary, but many will need to know a few basic facts about the vehicle you are financing, including: 

• The vehicle identification number (VIN).
• The make, model, year and trim.
• Any add-ons like gap insurance or an extended warranty.
• Current mileage and odometer reading.

You don’t need to know what vehicle you’re buying before you apply for a preapproved auto loan. Like with proof of insurance, lenders may not need vehicle information until you have a vehicle picked out. In general, you will have 30 days to shop after applying for preapproval or prequalification.

Down payment

Similarly, you may need to provide proof of your ability to make a down payment to your lender. Be prepared to pay at least 10 percent, but preferably 20 percent, of the final sale price when you buy a car.

The size of your down payment can have a significant impact on the amount you need to finance, and as a result, your monthly payments and the total amount of interest you pay. For example, this is how different down payments affect the monthly payments and interest for a $40,000 car if you borrowed an auto loan with a 48-month term and a 6.61 percent interest rate.

Before you start shopping — or even applying for preapproval — use a down payment calculator to ensure you stay on budget.

Current vehicle registration

If you plan on pursuing dealership financing and want to trade in your car as part of the transaction, you may need to bring in its current registration. This proves that the vehicle belongs to you and lists any liens, if applicable. You may also need to bring in the loan payoff amount and other documentation if you don’t own your car outright.

The dealership should be able to provide a list of what it needs from you. Go over it carefully so you don’t miss a step during the financing process.

Tips for completing an auto loan application

Applying with multiple lenders and preparing your documents may have a positive impact on your loan process and the rate you are quoted. When you’re ready to submit an application, follow these steps to make the most of your auto loan:

1. Fill out the application completely and accurately: When filling out your application, provide all of the requested information, even if it doesn’t initially seem important. This will likely include income verification through bank statements, W-2 forms, 1099 statements and pay stubs.
2. Avoid financing for your down payment: It is generally not recommended that you use your home equity or other loans to help fund your down payment. Lenders will want to see that you have the cash needed to purchase the vehicle.
3. Consider add-ons: Decide which add-ons you want, if any. While it may be convenient, don’t roll them into your loan. Most add-ons can be purchased through a third party for much less — and you won’t pay interest if you cover the cost out-of-pocket.
4. Read carefully: An auto loan agreement is a legal document. Read it before signing, and if you are financing through a dealership, be sure to check for common dealer tricks.
5. Make copies: Keep copies of all your loan documents in a secure place. Think about saving both physical and electronic copies so you can reference them as needed while paying off your loan.

If you opt for dealership financing, there are multiple dealer fees that you can avoid or negotiate. “You don’t want fees to be part of your loan,” Brian Moody, executive editor at AutoTrader, says. “Even if it means you a have little more money upfront, it’s a better value to not pay interest on fees regardless if they are required or optional fees.”

Bottom line

Documents are only one part of the application process. To get the best auto loan rates, apply for preapproval with least three lenders. This will help you determine what documents you should need — and shop with confidence once you know your rate and how much you can afford. Securing an auto loan takes time, but being thorough will help you avoid having your application denied over a preventable mistake.