Buying a car is a big deal. It involves a lot of decisions, such as buying new vs used, what type of auto insurance to get, how much to spend for a fair price, where to buy, features and so forth.
You might be very excited to get behind your new car and before you hit the road, the MOST important thing to do other than the title and ownership is auto insurance. In most cases, buying a car without insurance is just plain stupid. But not everyone agrees with me. Some people say that buying a car without insurance makes sense because you won't lose anything if you wreck it.
Trust me, you don't want to be in an unlikely situation where you get into a fender bender before getting home.
In this article, we will answer what to do when you buy a car. We will cover the most important steps to take after buying a new or used car. Most of the steps are similar but depending where you buy, the dealership may handle the documentation and tags for example.
Like I mentioned before, buying a car is exciting. It's also scary as hell. There are lots of unknowns involved with buying a new vehicle. We will cover what you need to do when you take delivery of your new car.
Let's dive in...
Steps to Take After Buying a Car
Here is a summary of what you need to take care of after you purchase:
- Get Insurance for the car
- Pay any sales tax
- Register the car
- Install license plates and keep registration car in a safe place.
- Optional - Check if Inspection Sticker is valid.
Insure the Car
First things first. You will need to get insurance coverage for the car. Before you take the keys, the dealership will need to verify that you have proof of insurance on it. We will cover the different type of coverage but your insurance company will be able suggest what is recommended.
Based on your make and model, your age, your State and driving history, your rates can vary. I had Liberty Mutual, AllState and Geico in the past and currently use Geico exclusively. Depending on your state, you might have different carriers.
Rates for your monthly insurance can range from $545 to $1,771 per year based on the average of car insurance data from BankRate.com
You definitely want to have your insurance car available when you pick up the car.
If you purchase a used car from a private seller, then you will still want to have coverage. Once you take possession of the car and title, the previous owner is no longer liable for any accidents based on the Bill of Sale date. Please, as a reminder, get insurance before you take to car home. You don't want to lose your driver's license or car because of an unfortunate accident without insurance.
Just in case you are unsure of what insurance policy to get, here are some quick details:
What is Collision Coverage?
Collision coverage in your insurance policy is a type of liability insurance that protects against damage caused by accidents involving your vehicle. Most states require drivers to carry certain amounts of collision coverage, depending on the cost of the vehicle. Some states may also require additional coverages such as comprehensive or uninsured motorist coverage. These policies protect you in case another driver causes damage to your vehicle. Many states only require minimum levels of coverage but we recommend making sure the full value of your car is covered.
What is Liability Coverage?
Liability coverage protects against legal claims made against you by third parties. It covers any damages caused by the negligence of others, such as accidents, injuries, property damage, etc. Liability coverage is mandatory in almost every state, and many states require you to carry it as part of your policy. Liability coverage pays for all costs associated with an accident, including medical bills, lost wages, pain and suffering, and more.
What is Comprehensive Coverage?
Comprehensive coverage is a type of auto insurance policy that covers damage to both the vehicle itself and any personal property inside it. This includes items like clothing, electronics, and furniture.
Comprehensive coverage is generally offered as part of a standard auto insurance package, but it may be available separately. Regardless of state law, comprehensive coverage is a good idea for everyone. It protects against theft, vandalism, fire, flood, earthquake, and other disasters. It also provides protection against uninsured motorists, meaning that if you're involved in an accident caused by another driver without insurance, you'll still receive compensation.
TIP: I recently was covered when Storm Ida hit my area in 2021 and my comprehensive coverage helped protect us. Due to the flooding waters, the car was totaled out and we got a payout for the full value of the car. So, it's a perfect example of why Comprehensive coverage is so important. With climate change being real, being covered for mother nature is so important. Unfortunately, if you don't have comprehensive coverage, you are out of luck and out of pocket.
What is a Deductible?
A deductible is the amount of money you pay upfront to cover damage to your vehicle. Your insurer pays for repairs until the total cost reaches your deductible. Once the repair costs exceed your deductible, you take responsibility for paying the rest yourself. A typical policy may require you to pay $500 towards your deductible, meaning you'd only have to pay $500 of any repair bill above that figure.
Typically the higher the deductible, the lower your premium would be. I would avoid high premiums as when you need it, it will hurt your wallet. $500 Deductible is a good number to choose.
So remember the importance of car insurance, don't roll the dice or leave it to chance.
Register the Car and Transfer the Title
Registering your car is required. This is an official transfer of ownership in the eyes of the DMV. You'll need to register it within 30 days of purchase. If you don't, you could face fines of up to $1,500. 30 days is a lot of time and you don't want to put this off. Vehicle registration is just as important as car insurance.
If you have purchased from a dealership, they usually will handle the registration of the car and provide you with the plates when they arrive. This is part of their documentation fee. I personally think its worth it since you don't have to waste time at the DMV.
As mentioned before, some dealerships offer to handle the paperwork. Other times, though, you'll need to deal directly with the DMV office if you buying from a private party. Either way, make sure that you've got everything ready before heading over such as Title, Bill of Sale and Insurance card.
If you are missing any documents at the DMV, you will have to reschedule once you have all the proper, required documents.
In addition, if you are registering a car from a private party sale, you will need to provide a Bill of Sale where the sales tax will be calculated from the sale price. If you purchased from a dealership, your purchase price already includes the sales tax of your state.
License plate installation is usually required when buying a car. However, there are exceptions. For example, some states require license plate installation at the dealership, but not at the dealer lot. Some dealerships will be able to provide you with temp plates to mount in the rear window to license plate area.
However, these are only good for 30 days. You should be able to receive your official plates by mail.
If you're planning to purchase a used vehicle, you might be without plates on your way home. In that case, you will need to have your title available to prove ownership and bill of sale. This will help CYA in case you get pulled over. Remember, you should already have your new insurance for your car. Proof of insurance helps law enforcement know that you are in the process of owning the vehicle.
I have purchased many cars in the past and typically like to purchase cars that are currently inspected and have a valid inspection sticker. Usually you can simply resume the inspection when it is up for renewal.
If your car doesn't have valid inspection sticker, you should head to your local DMV or auto shop for a valid sticker.
A valid inspection sticker is usually good for 2 years for used cars and up to 4 years for new cars.
The National Highway Traffic Safety Administration (NHTSA) requires automakers to conduct annual inspections of vehicles manufactured since 1996. Each inspection must cover 12 points, including the following:
1. Engine compartment - Includes hood release switches, hoses, belts, wiring harnesses, battery terminals, fuses, ignition switch, starter motor, power steering pump, radiator fan motor, coolant system, fuel filter, intake manifold gaskets, spark plugs, distributor cap, distributor rotor, coil, exhaust pipe(s), muffler(s), catalytic converter(s), throttle body(s), carburetor(s), camshaft(s), timing chain/belt, water pump(s), valve covers, crankcase ventilation valves, thermostat housing, heater core, electrical components, and headlight bulbs.
2. Interior - Includes seats, door panels, carpets, upholstery, trim, carpeting, floor mats, glove box, radio controls, armrests, center console, instrument panel, dashboard, windshield wiper blades, wipers, ashtray, trunk lid, spare tire carrier, cargo area, cargo tie downs, cargo netting, rear view mirror, and sun visors.
3. Exterior - Includes bumper, grille, headlights, taillights, turn signals, stop lights, parking lamps, antennae, hubcaps, bumpers, side marker mirrors, tailgate, doors, windows, roof, and trunk locks.
4. Lights - Includes low beam headlights, foglights, high beams, running boards, step rails, door handles, and license plate light.
5. Wheels - Includes tires, wheel bearings, brakes, wheels, hubs, and lug nuts.
If you do not pass inspection, it happens sometimes, then you will be given 30 days to make the repairs for re-inspection.
Make Necessary Repairs to Pass Inspection
Depending on where you purchased your vehicle, you might have the repairs coverage by a limited mileage warranty if provided by the dealership. However, if you purchased from a private party, those sales are usually sold as-is.
The good news is that with the savings from a private party sale, you can put it into repairs in order to pass inspection. Either way, a valid inspected car is peace-of-mind whenever you hit the road.
Save Your Paperwork
When buying a car, it’s important to make sure you keep copies of everything related to your vehicle purchase – including the bill of sale, title transfer documents, odometer statement, maintenance records and repair invoices. This way, if something goes wrong later down the road, you’ll know exactly what happened and why. You might even find out about some hidden problems with the vehicle.
- Keep copies of everything related to the transaction.
- Make sure you keep track of the vehicle’s history.
- Always keep your vehicle’s proof insurance and registration in the vehicle, somewhere safe.
Leave the License Plates With the Seller
The license plate is usually tied to the owner, thus you will have to surrender the plate to the seller. As mentioned previously, you will need to drive carefully back home or have the car towed back in order to transport the vehicle.
A Final Word
Whether you buy from a dealership or private sellers, it's important that you keep in mind all of the steps that we detailed in this article.
In conclusion, buying a car is a huge step towards independence. But it's also a major financial commitment, which means that you want to make sure you're doing everything possible to protect yourself from potential problems. That's where car insurance, registration and inspection services come in. They help ensure that you're protected against any issues that could arise during the period between new purchase, ownership and delivery.
The process itself is fairly straightforward as detailed above. Once you've found a vehicle that meets your requirements, you'll need to register it with the DMV. This involves filling out forms and paying fees, and it usually can be completed in a week by dealership or on your own.
Once these steps are completed, you'll receive the official license plate. At this point, you can install on the vehicle and enjoy the road ahead.