Steps to Getting a Car Loan!
How Do You Navigate Getting a Loan to buy a Car in Jamaica?
Congratulations! You’ve made the decision to purchase a motor vehicle. So what next? Navigating the auto loan landscape can be tough, particularly for first time purchasers. These eleven steps on obtaining a motor vehicle loan will assist in guiding and preparing you towards driving away with your new car.
Step 1. Research and locate the vehicle you wish to purchase. Whether you are purchasing a new vehicle from a dealer or purchasing a used car from the classifieds, you must first identify the vehicle you wish to acquire. Test drive the vehicle and have a mechanic check it out if possible. The Sunday Gleaner classifieds, JaCars.Net or AutoAdsJa are some places you can start to look to understand what prices are here so that you can determine if that is a vehicle you can afford. Use this loan calculator to assess what the monthly payment would be for a vehicle loan, which is typically about five (5) years long but lenders are now extending to seven (7) years and more. The rate that you will pay for a new vehicle is typically lower than a used vehicle. The average rate at commercial banks is about 8.5% for used vehicles and 7.5% for new vehicles. If you are buying from a dealer, you can often do the loan application through a representative associated with them. This however limits your ability to shop around for the lowest rates.
Step 2. Procure a Valuation Report for the car from a reputable auto adjustor/valuator. A valuation report will indicate the condition and history of the vehicle and the estimated market price. You can use this as a tool in negotiating the purchase price with the seller. Your lender will also request a copy of this, particularly for used vehicles.
Step 3. Contact your financial institution (if you are not using the one through the dealer) and request information on the loan application requirements including how much you will have to deposit (0 – 25% is what is normal). It may take some time to get everything together, so get this information as quickly as possible. The loan requirements typically include:
- Loan Application Form
- Proof of identify (Driver’s License and TRN)
- Proof of income (Job Letter, Letter from Employer)
- A copy of the vehicle Registration
- A copy of the vehicle Fitness
- A copy of the vehicle Title (used cars)
- A valuation report or pictures of the vehicle
- Proof of the deposit made to the vendor (a copy of the receipt)
- Credit Report
- Quote for Motor Vehicle Insurance
- Import Entry (C87 form) for new cars.
Note that you will need to request copies of the vehicle documents (fitness, registration and title) from the seller.
Step 4. After you have agreed on the sale price, pay a deposit to the seller. Most financial institutions will not provide 100% financing for a motor vehicle unless it is brand new. For used vehicles, they usually require a deposit of 5 – 25% of the cost, depending on the age of the vehicle. Upon payment of the deposit, request a receipt and a proforma invoice from the seller indicating the amount of the deposit paid, the balance owed and the sellers banking information (financial institutions are required to send sums over $1 Million electronically).
Step 5. Submit your documents to your financial Institution. Make an appointment with your loan officer to discuss the loan terms and conditions. This includes, how much you will be required to pay back, when the payments are due, the rate of interest and the number of years (term) of the loan. It may be possible to negotiate the terms to reduce the monthly payments. A loan calculator is also a useful tool to assist in figuring out how much you will pay based on how much you are borrowing but note that you will also be required to pay a loan application fee.
Step 6. Collect transfer documents from your lender. The financial institution may take a few days to process your loan application as they have to undergo their checks. After it is processed they will contact you to sign some legal documents authorizing them to put a lien on your vehicle, amongst other things. They will provide you with a letter of undertaking which you will then give to the seller of the vehicle. This letter indicates your lender’s commitment, that once the vehicle has been transferred in your name, they will pay the balance stated on the pro-forma invoice. They will also provide you with a lien registration document.
Step 7. Obtain the vehicle’s original documents. After you provide the seller with the letter of undertaking, they will then give you the original fitness, registration and signed motor vehicle title (for used vehicles) to transfer the vehicle in your name.
Step 8. Obtain Insurance. Yes, you must insure the vehicle before you actually get it. Visit your insurance company, pay the required premium and obtain a cover note for the coverage of the vehicle. They will ask to see the vehicles registration and fitness and your driver’s licence. Some lenders build the insurance cost into the monthly payment.
If you are strapped for cash, some insurance companies will offer insurance premium financing, which allows you to pay your insurance over a period of months.
Step 9. Transfer the vehicle. Take the original fitness, lien document (from your financial institution), registration, title and cover note to the tax office to transfer the vehicle in your name. The tax office will complete the transfer, register the car in your name, give you a stamped lien document and new licence plate for your car. Yaay!
The name and address of the financial institution providing the loan is registered at the tax office and noted on the vehicle’s title after it is transferred to you.
Step 10. Return to your lender with the vehicle documents in your name and the lien document indicating that the lender’s interest was noted. The lender will then pay the balance of the purchase (the loan amount) to the seller. This is usually electronic and should not take more than 1-2 days.
Step 11. Collect your vehicle! After the seller confirms that they have received the balance of the payment you can now collect your vehicle! Congrats! Make sure you remember to put gas in it before you drive around to show off your new car!