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Tips for Buying a Car as a Service Member

a row of cars parked in a lot

Buying a car is one of the biggest and most important purchases you will make. There’s a lot to know about — from sticker prices to auto loans to warranties. Do your homework ahead of time, get advice from someone you trust in your command, be mindful of scammers or deceptive sales practices and follow these steps.

1. Assess your needs

Think about how owning a vehicle fits into your military life. That new car with all the bells and whistles may look good, but remember that the moment you drive off the dealer’s lot, it will depreciate. New cars lose value faster than used cars, as this blog post explains.

Your answers to these questions may help you figure out the type of car that best meets your needs.

  • In general, what will you be using your car for?
  • What will you do with your car while you are deployed?
  • Would you be comfortable putting your vehicle into storage when you PCS to a place where you can’t take the car?
  • If you can take your car to your next assignment, what type of vehicle would be good for your new location?
  • Could you get by with ride-sharing or even a bike?

Free Financial Help Available

Whether you’re buying a car, a home or balancing your budget, Military OneSource offers free financial counseling to help you make smart money choices.

2. Determine how much car you can afford

The next step in car shopping is to calculate how much you can afford to spend. Use online car buying resources and consumer reports — available through the DOD MWR Libraries — to gauge pricing and the reliability of the vehicles you’re considering.

Then, use Military OneSource’s Member Connect Support Services’ car payment calculator to make sure you are not buying more car than you can afford or expect to be able to afford in the future. And don’t forget to factor in the monthly and annual expenses that come with owning a car — such as state vehicle property taxes, registration, insurance and maintenance. It is also important to know the expected gas mileage for the vehicle you are considering buying and factor it into your monthly expenses.

Calculate your spending power using your base pay. You don’t want to build your budget around special pay, because your car payment will still be around after it ends.

Consider contacting a Military OneSource financial counselor or visiting a personal financial manager at your military installation to ask questions and get information on figuring out a budget, financing options and the car-buying process itself.

3. Focus on the financing

Many car buyers use auto loans to pay at least some of the cost of a vehicle. A loan can make paying for a car easier, but be smart in your borrowing. Making a few wrong decisions in the finance office could end up costing you. Understand the total cost of your purchase, how much you are financing and how much interest you will pay over the life of the loan.

The Military Lending Act offers protections to service members, including limiting the amount a creditor may charge, but military members should still educate themselves on the financing process. Check your installation’s website to see if it posts off-limits establishments to help you stay clear of local predatory lenders or car dealers.

These factors play into your loan terms and what you’ll pay:

  • Your credit score: Prepare now by checking your credit report. You may find errors to address, or you may want to take steps to improve your score. Military OneSource free financial counselors or your personal financial manager at your installation’s Military and Family Support Center can help.
  • Interest rates: Check the current market rates for auto loans. Keep in mind that your rate will be based, in part, on your credit history, so a first-time buyer may not be eligible for the best rates. Also, check with your bank or credit union to see what they can offer.
  • Beware of add-ons: Beware of last-minute dealer add-ons, such as extended warranties, which may extend you beyond what you have budgeted for.
  • Down payment: Larger down payments mean lower monthly costs and/or shorter loan terms, which puts more money in your pocket in the long run. Trading in an old vehicle can also bring your cost down, though it may also pay off to do some research and sell your car outright.
  • Focus on the total cost: Your monthly payment is an important part of the equation, but the actual cost of the car is what’s most important. A creative financing person can always manipulate the terms to get the monthly payment down to a certain number, usually by giving you a longer loan.
  • Length of the loan: Longer loans mean more money paid in interest, as this infographic shows. More importantly, longer loans mean a longer time that the balance on the loan will be higher than the value of the car, which is also called negative equity, being “upside-down,” or being “underwater.”
  • Location restrictions: Will your lender permit you to take the vehicle out of the state or country if you get overseas orders? To ship a vehicle, you’ll need written permission from the lienholder. Make sure your loan doesn’t prohibit you from moving the car across the country or world.

Planning for the financial aspects of buying a vehicle helps ensure that you’ll end up with a car you can afford. It’s essential that you don’t get overextended because money troubles could derail your military career.

4. Car shopping

Once you know how much you can afford to spend, research vehicles online to determine which ones best meet your needs as well as your budget. With information in hand, visit several sellers and test drive several different vehicles before you make a final choice.

Consider taking a friend with you or asking someone in your command to help you with your purchase. It’s a lot easier to walk away when you’re not alone. Don’t feel pressured by your situation or the seller to make a snap decision. Consider making a list of questions based on your initial visit and then follow up if you’re still interested in buying.

Once you’ve found the right car, there are still a few things to finalize. Remember: understanding all the costs involved in owning a car can help you buy a vehicle that keeps you within your budget.

Finish the paperwork: You’ll likely spend some time with the seller finishing the paperwork for your car purchase. Don’t buy anything at the last minute that you haven’t already factored into your budget. Consider taking the loan and sales contract to your legal services office for a review. Don’t sign a contract until you understand all the terms.

Get the right insurance: Insure your new car immediately. Consider comparison shopping between a few insurance companies to see if one has better rates for the same coverage. Be sure that your insurance company understands that the car is registered in your state of legal residence but generally needs to be insured where it is kept. Check with your insurer to make sure you have the right coverage.

Buying the right vehicle for your needs and one that fits your budget can help make car ownership a positive experience. Doing your homework and shopping smart is the best way to make the right choice for your military life.

For a more in-depth look at the car buying process, check out the Car Buying Basics course on MilLife Learning.

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