Military Car Buying Guide – Everything You Need to Know About Buying A Car In The Military

Table of Contents

1. First – Buying a Car Within Budget
2. Second – Financing Your Car Purchase
1. Get Pre-Approved First
2. Auto Loan Terms
3. Where to Get Auto Financing
3. Third – Finding the Right Car
1. Which Type of Car Should You Buy? New, Used, or Lease?
2. Salvage Or Repairable Titles
3. Separate the Search from the Purchase
4. Vehicle Values & Pricing
5. Buying a Car Stateside
6. Military Discounts on New Cars
7. Overseas Military Car Sales
4. Fourth – Negotiating Your Car Purchase
1. Always Request “Out the Door” Pricing
2. Other Negotiating Tips
5. Fifth – Wrapping up the Paperwork
1. Miscellaneous Add-ons and Upsells
2. GAP Insurance – Total Loss Protection
6. Wrapping it Up

This is a fairly massive subject, so let’s see if we can make your next or first car-buying experience a (more) pleasant one. To make this an easier and more straightforward process, I will lay out the process in a logical order. First, second, etc.

Personally, I have purchased quite a few vehicles over the years. I have learned the hard way that mistakes cost time and money. Hopefully, this guide will help you avoid some of the more costly mistakes.

I should also point out that this is just a basic overview, a lot of variables will exist.

First – Buying a Car Within Budget

This is an easy step. How much do you want to spend on a vehicle?

Some of us will come up with a total dollar amount we want to spend, and some of us will come up with a monthly payment. Either way, it’s a good idea to add up additional expenses you will see with this purchase on a monthly basis.

Things like auto insurance, fuel, and maintenance can add up quickly. For me, those items alone add an additional $300/mo of expenses to a vehicle. Not accounting for the additional costs of ownership can be one of the biggest car-buying mistakes.

When it comes to the budget, STICK TO IT!

Setting a firm upper price limit on your purchase is one of the most important factors when buying a car, and it’s also a great negotiating technique. More on that later. 

Dealerships are really good at squeezing a few extra bucks out of a sale. If you want to pay $300/mo, don’t let them talk you into a vehicle that is $375/mo. It’s not fun waking up a month later and wondering what you thought when you agreed to pay 25%+ more than you wanted to.

Finally, err on the side of a conservative purchase. Housing and transportation are most people’s largest monthly expenses. Controlling those two expenses can help you have more room in your budget for meeting other obligations, such as saving money, paying off debt, investing for retirement, starting an emergency fund, and entertainment, and having some wiggle room for unexpected expenses.

Second – Financing Your Car Purchase

If I could recommend anything, I would say that you should save for a car and pay for it in cash. No, seriously. The best car is a paid-off car.

Auto loans are tough to get out of, especially if you finance a car without a down payment. If you are ever in a financial crunch, that really sucks.

If you decide that getting a loan is the best option, then be an informed consumer. These tips can help you avoid the more costly mistakes that can occur when financing a vehicle purchase.

Get Pre-Approved First

If you need an auto loan, it’s best to get pre-approved from your current bank or credit union before buying. Personally, I think companies like USAA, Navy Federal Credit Union, and PenFed are great places for military members and veterans to get financing.

The reason for this is that some auto dealers will send your info to many financial institutions which will run your credit report multiple times. This is especially true if you have less than perfect credit. When I was younger, I had my credit ran 14 times for a car, courtesy of a dealership. No thanks! I will also mention that just because you get approved for a $50,000 car doesn’t mean you should. See the budget topic above.

For example, when you apply for an auto loan with USAA, they will approve you for a max purchase price, give you a few different loan terms to choose from, then give you an approval letter that you can give to the dealer. They also will let you print a check to give to the dealer. Not all dealers accept the printed check. However, it’s catching on. Naturally, this can all be done online. Navy Federal’s process is fairly similar.

Auto Loan Terms

The actual terms of your financing are beyond the scope of this article. However, I will say that you should keep your interest rate as low as you can and the length of the financing as short as possible. I know you want that flashy car or truck, but paying on it for 8 years and 15% interest is a bad idea.

Aim for a loan in the 3- to 5- year range, and no longer. Most people don’t keep cars longer than 5 years and you don’t want to be in a position of trading in or trying to sell a car that still has a loan on it.

Auto loan interest rates will vary based on many factors, including your creditworthiness (credit report and score), your current debt, the type of car (new or used), and other factors, such as promotions.

Knowing your credit score before you go to the dealership or start shopping for a loan is a good idea. This gives you a better idea of whether or not you will be approved for a loan and if the interest rates will be competitive. You can get free credit scores from many places online. And some banks, such as USAA, offer free credit scores.

As always, read the loan terms carefully!

Where to Get Auto Financing

If you are active duty, lenders love you. They know you are under a contract with the government, have a steady paycheck, and you can get into extra hot water if choose to miss payments. I have seen plenty of new recruits that have got sucked into a brand new car or truck just out of boot camp. I did. Don’t be that person!

Here are some Military friendly banks and auto lenders (no particular order):

• USAA
• Navy Federal Credit Union
• PenFed Credit Union
• Andrews Federal Credit Union
• Service Credit Union
• Your current bank or credit union

Third – Finding the Right Car

Thanks to the Internet, this is much easier than it used to be. We used to read newspapers for auto listings. Can you imagine?

Websites like Autotrader, Cars.com, Edmunds, and TrueCar are great places to start. Also, the Internet makes finding the best deal easier than ever. You can search on various websites for deals, or contact dealers directly to get their best price upfront.

But we’re getting ahead of ourselves. We shouldn’t worry about pricing until after we find the right car.

Which Type of Car Should You Buy? New, Used, or Lease?

This is another subject that may be beyond the scope of this article. Each one has its own benefits and drawbacks.

New Vehicles

New vehicles are expensive, and they depreciate quickly in the first few years. If you are making payments and have little to no down payment, your loan will be more than the value of the vehicle for the first few years (see GAP Insurance further down). The upside is that you get a nice new vehicle and a bumper-to-bumper warranty.

Used Vehicles

Used vehicles are quite cheaper, and the previous owner(s) paid for the depreciation. The downside is that you never really know what happened under the previous owner(s), and the vehicle will have little to no warranty.

You can reduce the risk and warranty issues by purchasing a Certified Previously Owned (CPO) vehicle. CPO vehicles are usually a little more expensive than a comparable car without the certification, but they must meet strict inspection criteria and come with an extended warranty.

Out of all the vehicles I have ever purchased, I always stick to the Used Vehicle category.

Leased Vehicles

Leased vehicles also have pros and cons. A lease can be a great way to get into something you would usually not be able to afford because your payments are based on the vehicle’s value when you return it. You also get the benefits of a new vehicle.

The downside is that it is almost impossible to get out of it, and you are responsible for tires, nicks and dings, and anything else that happens to the vehicle. This includes paying for every mile over your lease entitlement. Also, if you are bored, search “lease money factor.” It’s how they calculate interest rates on leases.

Overall, leases can be riskier than buying a car since you don’t own it and must pay for additional usage and wear and tear.

Salvage Or Repairable Titles

If you are uncomfortable fixing/repairing vehicles, stay away from this type of vehicle. I am a previously certified mechanic, and I am still leery of this type of vehicle. A salvage or repairable title from an accident is one thing, but one from a vehicle submerged in water is a no-go. I have owned two salvage title vehicles with no or very minor issues. They are easy to spot because they are 30%+ below book value. Also, you can NOT purchase GAP coverage for salvage title vehicles. However, you can get loans for them. Imagine that.

Separate the Search from the Purchase

Car salesmen are good at what they do. I’ve known several people who went to a dealership to test drive a car and drove off the lot a few hours later, wondering, “what just happened?”

Make sure you have a plan when you are still in the searching phase and deciding which car to buy. Until you decide upon the exact make and model of the car you will buy, you should hold firm to the “no purchase rule.”

All new cars are shiny and filled with features and upgrades that are likely an upgrade over your current vehicle. Of course, you can imagine yourself driving that vehicle! But don’t buy it until you have compared several makes and models to determine the best car for your needs, considering comfort, size, utility, and other features.

Once you have decided on the right vehicle, you should search for the right deal. Buying before you reach this point in the process almost guarantees you won’t get the best deal, and you may not even get the right vehicle for your needs.

Don’t suffer buyer’s remorse!

Vehicle Values & Pricing

Only after you have decided on which vehicle to buy should you focus on the price of the car. There are several great resources to help you do just that.

Kelly Blue Book (KBB) is the standard reference to find a basic value. Other services you can use to get a free car valuation to include NADA Guides (National Auto Dealers Association), Edmunds, and some others. Edmunds is a nice choice because you can also use their service to search for new cars and get quotes directly from multiple dealers.

Some companies use the Black Book to find values for loan purposes. USAA is one company that uses Black Book. True Car can also help you find a value range.

Finally, dealers also use auction or wholesale pricing to set price values, which you don’t have access to. If you are trading a vehicle in, this values your trade lower. Remember that dealerships are out to make money, not give you good deals.

Buying a Car Stateside

Websites like Edmunds, Autotrader, Cars.com, and TrueCar are great places to start. The options are almost endless. Everyone seems to offer some sort of car buying/searching service. USAA, for example, will give discounts to its members if they purchase from its car-buying service.

Overseas Military Car Sales

When you are deployed or stationed overseas, you have options that US people do not have. I am mostly talking about new cars for this. Companies like Volvo and BMW will give you great deals, low to no taxes, free stateside shipping, worldwide warranties, and so on. When I was stationed in Germany, a number of friends and coworkers were buying Volvos because the deals were really good.

Military Autosource is also an authorized contractor for AAFES (Army Air Force Exchange) and NEXCOM (Navy Exchange). They specialize in American vehicles that have discounts and worldwide warranties. I have personally ordered a new vehicle back when they were called Exchange New Car Sales. I later canceled my order because the delivery would have taken many months, and the deal was not that good. However, it is an option worth checking out.

Buying from a local person is also an option while overseas.

Craigslist is international after all. Remember that if you buy a vehicle from a different country, the emission and crash standards are usually different than the US. So, you would likely not be able to import the car back to the US. I was able to find some really great deals. Like anything else, rules and local laws will apply.

Check out the “Lemon Lot”

While not exclusive to overseas, a number of military locations have cars that local Military members are trying to sell. We lovingly called those locations the “Lemon Lot.” Honestly, it was hit and miss. I actually bought and sold a few cars from the lot with good luck. Just something to keep in mind when searching for a vehicle. Full disclosure, I was an auto mechanic in the military, so I felt comfortable buying and selling cars in that capacity. A certified mechanic should always inspect used cars.

Fourth – Negotiating Your Car Purchase

This is somewhat of a lost art. Thanks to the Internet, dealerships are in a cut-throat competition with lots of others so negotiating is really tough. Usually, you have a bit more leeway when you buy from a private party.

Quite a few dealers will quickly let you know that they don’t negotiate. However, many dealerships will still work with you on price to lock down a sale. Start by getting multiple quotes in writing from dealerships in your area.

Always Request “Out the Door” Pricing

Vehicle pricing is always more complicated than the sticker price. There are standard fees such as tax, title, license, and many other potential fees that may vary by state. Some of these fees are required, while others are customary but may be negotiable.

That’s why you need to always compare apples to apples when comparing vehicle prices.

How to get a quote: Contact the Internet Sales Department with an inquiry on the make, model, and options you want, and ask for an out the door price (to include vehicle price, options, tax, title, license, dealership fees, etc.). This gives you a firm number you can use to compare pricing at dealerships.

Getting an out-the-door price is essential for properly comparing prices with other dealers. Some dealers may refuse to give an out-the-door price via email and may require you to go to the dealership to get the price.

Don’t fall for this!

They aim to get you in the door and convince you to buy before you leave. They also want to convince you to purchase more add-ons at the time of sale. See below for more on this topic.

If the dealership refuses to give an out-the-door price, you can let them know you only have a limited amount of time and will go with the dealership that gives you the best out-the-door price. If they can’t give you an “out-the-door price,” they won’t earn your business. Give them one more opportunity to earn the sale, then move on. There are plenty of other dealerships that will do their best to earn your business!

Other Negotiating Tips

Another tip is to shop for a new car at the end of the month. Many dealerships are trying to reach sales quotas and may be willing to drop their price below their normal sale price to reach valuable incentives that will more than make up for the hit they take on that particular sale.

If they don’t mind a little haggling, try and get more for your trade or get them to take some off the purchase price. When shown the purchase price, make your counteroffer and then say nothing.

Also, don’t be afraid to be firm. The dealer will almost always come back with way less than you initially wanted. For example, if you ask for $2,000 off, they may come back with a $300 offer. Hold firm and say, “I’m sorry, that just doesn’t work for me.” Granted, this dollar amount is hypothetical. Private parties work in much the same way.

The dealer may not negotiate, so switch to plan B. Try to get free stuff! Floor mats, a year’s worth of oil changes, tires, a full tank of gas, an extended warranty, and so on.

Fifth – Wrapping up the Paperwork

This is an important and often overlooked step in the car-buying process. I recommend reading over everything before you sign. I have had a couple of times where the final price was different or an interest rate was off. Just take your time and make sure all the paperwork is legit. If you are buying from a private party, make sure you do a bill of sale.

Miscellaneous Add-ons and Upsells

Most car dealerships sell expensive upgrades, such as window etching, tire and wheel replacement, undercarriage coating, upholstery protection, and many more items.

Most of these are very overpriced. In fact, these “upgrades” can often add several hundred dollars to your purchase, or even upward of an additional $1,000, depending on your vehicle and the number of upgrades offered.

Unfortunately, most of these “upgrades” are built on fear and loss aversion and don’t add a lot of value to the buyer.

Buyers see their shiny new car and fear it being stolen (window etching), damaged (tire and wheel replacement), or worn out over time (undercarriage coating and upholstery protection).

Most of these items are unnecessary. But if you decide to get them, you can often pay for these items out of pocket for much less than the dealership cost, if you even decide to get them at all.

GAP Insurance – Total Loss Protection

Consider adding GAP or Total Loss Protection insurance to your purchase if you take out a loan on a new car. If you paid for the vehicle in full, you can ignore this. However, if you are buying new or used this insurance can be a lifesaver.

Basically, GAP insurance will cover the difference in your car’s value and what you still owe on it if you ever get into an accident and the vehicle is considered a total loss.

Say you get into an accident and the insurance company says your vehicle is not repairable (total loss). They will cut you a check for your vehicle, minus any insurance deductibles. Unless you had a large down payment or are aggressively paying down the vehicle, you will have a balance due. My car was worth $8,000 but I owed $12,000 at the time of the accident. GAP insurance covered the $4,000 that was remaining. It’s been around $300 every time I have purchased it.

Wrapping it Up

Buying a car can be complicated, even if you are well-prepared. The best thing you can do is arm yourself with knowledge, know which vehicle you want, understand what the average prices are for your vehicle of choice, and go into the experience with an open mind.

The Internet gives consumers more information than ever, making it easier to compare prices and get a better deal. Remember, vehicles are commodities. With rare exceptions, you should be able to find a comparable vehicle at a comparable price at another dealership.

Use this fact to your advantage. Don’ put up with high-pressure sales tactics, rude salesmen, or poor service. You have the power to get up and walk away at any time. Use your power to your advantage and walk away from any deal you aren’t comfortable with.

Good luck!

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