How do I Buy a Car With Zero Down?

Buy a car without putting money down.

Although some people can buy a vehicle without having to put money down, a loan pre-approval is highly advisable. People with poor credit may be able to borrow only 60 percent of vehicle's value, while some borrowers may qualify for 120 percent of value. The loan-to-value ratio is a percentage of loan amount compared with the retail value of the vehicle. Rebates, money off or cash back can also help, but if none is in effect, you might have to put money down. Get a pre-approval first.

Things You'll Need

• Recent paystub or W2 forms as proof of income
• Utility bill as proof of residency
• Social Security number
• Driver's License
• Proof of mortgage or rental payment
• Gross annual income

Instructions

1. Decide where you want to apply for a pre-approval. Check rates for local lenders and dealerships by calling or visiting websites.

2. After you pick a lender, tell the representative you want a pre-approval. Supply requested credit information, including name and address, proof of employment, gross annual income, mortgage or rental payments, time at your address and job, Social Security number and date of birth.

3. Wait for your pre-approval. At dealership's, the process is quick (within the hour or the same day). Dealers also work with banks that that can provide an immediate answer after credit review. Outside banks can take several days.

4. Ask what your loan-to-value ratio is. If the amount is 100 percent or less, you must choose a vehicle that is discounted sufficiently below the retail or the price to cover your taxes and fees. If your loan amount is more than 100 percent, you have room to add taxes and fees without putting any money down.

5. Make it clear from the start that you do not want to put any money down, and work with a dealer who can help you stay under your lending threshold. Dealers can show you different vehicles that work for your lending requirements. If shopping with private sellers, keep in contact with your bank to find out the lending amount on particular cars that you are interested in.

6. Provide an outside lender with the vehicle identification information including purchase price to complete your loan. If purchasing a car from a dealer but using an outside lender, you need to bring a bill of sale to the lender. Arrange for insurance, which is required by lenders and states.

7. Sign your bank contracts at the bank or dealership. If outside of a dealership, you'll receive a check to give to the seller. If buying your car from the dealership, all Department of Motor Vehicle paperwork is provided. If not, follow the Division of Motor Vehicles procedures for your state before picking up the vehicle from the private seller.

Tips & Warnings

• If you are buying with no down payment, chances are your insurance will not cover the full value of your vehicle in the event of a loss. Ask about GAP insurance, which covers the "gap" between the loan amount and the vehicle value as determined by your insurance company.

References

• Edmunds: Strategies for Smart Car Buyers; Down Payment --- How Much if Any?