Understand What You're Signing When You Buy a Car

Learn about the paperwork you’ll have to sign when you buy a car.

Capital One | 

Nov 3, 2017 | 3 min read

Shutterstock 

You’ve found the car of your dreams, negotiated the price, and now it’s time to take care of the nitty-gritty paperwork. But it doesn’t have to be a long burdensome process. If you know beforehand what you’re expected to sign and what to look for, you can be in and out in no time flat. Here are some of the documents you’ll be expected to sign.

THE BUYER’S ORDER

The first paper in the pile is the Buyer’s Order, which isn’t a final sales contract, but rather a summary overview of what both you and the dealer have agreed to. It’ll list the price of everything related to the car—including base cost, sales tax, registration cost, dealer fees, a description of the exact make, model, style, and color of the car, and the VIN (vehicle identification number). Remember, the buyer’s order doesn’t commit you to buying the vehicle, so if you have any questions or want to change anything about the terms of the sale or specifics about the car, this is the time to do it.

THE BILL OF SALE

The Bill of Sale is the official sales contract for your car. It’s a binding agreement between you and the seller and it records all of the necessary information. It doesn’t prove ownership (you’d need a title transfer for that), but it records the transaction between the two parties and often includes the following info:

• Vehicle type (motor vehicle, motorcycle, or other vehicle—including mopeds and scooters)
• Specific vehicle information, including year, make, model, mileage reading and VIN
• Seller’s and buyer’s name and address
• Purchase price
• Seller’s and buyer’s signatures and date
• GAP, warranty, and any other products purchased at the same time

This is your last chance to review the agreement before it becomes legally binding and the car is yours. For that reason, it’s important to review the bill of sale carefully before you sign it. Make sure it accurately reflects your understanding of what you agreed upon.

RETAIL INSTALLMENT CONTRACT

If you’re planning to finance your vehicle, you will need to sign a retail installment contract. A retail installment contract is a binding agreement between you and the seller, where you agree to make payments towards the vehicle over a fixed number payments, or installments. Generally, these contracts include the following information:

• Buyer and seller’s information
• The financing company’s information
• Amount financed, and terms for repayment
• Annual Percentage Rate (APR)
• Down payment amount
• The amount, due dates, and total number of payments
• The total of payments, which includes both the amount financed and the finance charge
• Any other documents and disclosures required to complete the transaction

As with the bill of sale, thoroughly review the retail installment contract before signing. Verify all of the information and terms of the agreement are accurate and in-line with what you and the dealer agreed upon.

TITLE AND OTHER DOCUMENTS

When you buy a vehicle outright (i.e. without financing), the seller will provide you with the title to the car. After both you and the seller sign it, you will officially be the owner. You’ll need this signed title when you go to register your car. Also, state rules vary, but in some states you’ll also need an odometer statement and damage disclosure statement.

When you finance your vehicle, the lender will usually hold on to the title (and be listed on the title itself as a lienholder) until your loan is paid off.

Although the paperwork may seem overwhelming, don’t let it intimidate you. Take your time, read through the documents carefully to make sure everything is correct, and before you know it, you’ll be driving your new wheels off the lot.

Capital One

Banking should leave you with the same great feeling you get when you drive casually on a weekend afternoon. And that’s how I feel when writing helpful tips and reviews – passionate about cars and passionate about financing and everything in between when buying a new ride.