A Guide to Organizing Your Car’s Paperwork

As winter retreats here in Aurora, we look ahead to the spring and one of its inaugural activities: spring cleaning. Much more than dusting windowsills and scrubbing sinks, spring cleaning is an opportunity to take inventory of your life, a conscious un-cluttering of both your personal space and your mind as you prepare for the year ahead. 

Part of this process includes properly organizing your paperwork. As with anything else in modern life, car ownership involves a great deal of documentation. It can be overwhelming to keep everything straight – but simplifying your auto needs is what we do here at Charge-A-Car, where you can purchase and finance your next car in the same afternoon! 

What You Should Have 

License & Registration: If you’ve ever seen someone pulled over in a movie, chances are you know to always have your license and registration handy while driving. Make sure your registration is up to date; if the expiration date is near, take the necessary steps to renew it. It should then be signed and stored somewhere in your vehicle, such as the glove compartment or beneath the central console. As for your driver’s license, hopefully it’s already safely stored away in your purse or wallet – otherwise, your spring cleaning to-do list just got longer. 

Proof of Insurance: Owning vehicle insurance is a requirement for every licensed driver. It’s another item you’ll want to keep in your car in the event that you’re pulled over. You should also have it on hand in case of an accident, so that you can exchange insurance information with the other driver. At the very least, keep a photo of your insurance card available on your phone.

Vehicle Title: Unlike your registration and insurance cards, the title to your car needs more protection than your glove compartment can offer. This piece of paper is the only proof of ownership of your vehicle that you have, making it immensely valuable. Keep your title stored away in a secure place you’ll remember, such as a home safe. 

Service & Maintenance Records: Though documenting your vehicle’s history of service and maintenance isn’t a requirement, it’s still a good idea. It will keep track of what services were performed when, so that you’ll know the next time you’re due for, say, an oil change. More importantly, keeping detailed records of your car’s history will serve you well when it comes time to sell. 

Keeping Your Paperwork Organized 

While your registration and insurance should be kept inside the vehicle, we recommend keeping all other paperwork together. A safe space in your home is preferable, as it allows you regular access. This includes the title and service records, but also any other relevant paperwork, such as warranty and emissions test documentation. If necessary, divide and categorize accordingly, i.e. keep your insurance payments bundled together. Make sure you have the proper storage space to accommodate everything. 

In today’s digital world, it’s important to back everything up. Make physical copies of your paperwork if that’s your preference, but also consider uploading your files to cloud storage. By digitizing, you’re ensuring your files will remain available to the world – even when you’re having difficulty tracking down their physical counterparts. 

One Last Step 

Once you’ve collected and organized all relevant paperwork, your future suddenly becomes much more open. For starters, you now have everything you need to trade in your ride today! Any vehicle in our extensive inventory could be yours when you schedule your test drive at Charge-A-Car, Aurora’s number one spot for used car shopping. 

Presenting the Car Buying Dictionary

The used car buying experience can sometimes feel like it’s operating with its own language. Gap insurance, loan-to-value, negative equity… understanding all the terminology thrown at you can be intimidating.  

Here at Charge-A-Car, our goal is to make the car buying process as simple as possible. For that reason, we’ve assembled this convenient dictionary to break down some of the auto jargon you’ll encounter on your car buying adventure.

Down Payment: 

A down payment is a lump sum of money you give to the dealer upfront before purchasing the car. At virtually all buy here pay here (BHPH) dealerships, a down payment is required to get approved for a loan. If you’re able to put down an amount larger than the minimum required, it means lower monthly payments moving forward.

A down payment at a BHPH is typically around 20% of the car’s selling price. Since BHPH dealers rarely run credit checks, this amount may be higher than at other dealerships, to help mitigate the sellers’ risk. Fortunately, a higher down payment means lower interest rates for the duration of your loan.

Gap Insurance: 

Gap insurance – also known as loan gap coverage – is an optional car insurance coverage. In the event that your car is damaged or stolen and you owe more than the car’s depreciated value, gap insurance is there to help cover the difference. It’s called gap insurance because it helps pay the gap between the depreciated value of your car and what you still owe on it. 

Because the average used vehicle depreciates quickly – 20% after driving it off the lot and 10% in the first month of ownership is the general barometer – it’s not unusual to owe more on a loan than your vehicle is worth, making gap insurance a crucial investment. 

Interest Rates: 

Interest rates – or simply loan rates – are what you’re charged every month as part of your loan agreement. A percentage of the total loan, interest rates represent what you pay monthly in addition to the base amount. Many buyers choose to finance with longer-term loans in order to reduce interest rates, with average loans landing between 70-80 months. 

Loan-to-Value Ratio: 

A loan-to-value ratio (or LTV) is the total dollar value of your loan divided by the actual cash value of your vehicle. For example: if you take out a $25,000 loan to buy a $30,000 car, your LTV would be 83%.  

LTV changes over time as you pay off your loan. That can be largely attributed to the vehicle depreciating as it ages and racks up miles. LTV also naturally declines as you continue to pay off the loan, lowering the loan portion of the ratio. 

Monthly Payments: 

Perhaps the most straight-forward term here, monthly payments are simply the amount you’re paying towards your loan every month. What’s important here are the guidelines you should follow to make sure you’re not biting off more than you can chew. The average monthly payment for used cars is approximately $533. In general, no more than 10-15% of your monthly take-home income should be spent on your monthly payments. 

Negative Equity: 

Negative equity is when you owe more on your car than it’s worth. For example, if your loan amount was $30,000 and you still owe $15,000 – but your car is only valued at $10,000 – $5,000 is your negative equity amount. Many factors can cause negative equity, including low down payments or putting excessive mileage on your vehicle. 

For more info on how to bridge this divide, see “Gap Insurance.” 

Experience Great Deals, Redefined 

Transparency is of the utmost importance to us at Charge-A-Car. We’ll work with you through every step of the financing process, breaking down each component and defining each term. After all, used car buying should be a pain-free experience. Schedule your test drive at Charge-A-Car today, and drive into tomorrow with a clear path forward.