The Smart Way to Buy a Car After Deployment

Many service members returning from deployment find themselves needing a car. Maybe you sold yours before deploying, or maybe you simply need one for your next phase of life. If these situations sound familiar, then follow these four steps to find yourself in a new set of wheels PDQ.

Determine Your Budget

Yes, lenders will often tell you how much they think you can spend, but that number doesn’t always perfectly align with your financial goals. You can come up with a good budget by doing three things:

Take Stock of Your Financial Situation

Start by looking over your budget and making sure it’s up to date. Figure out where the money for your car purchase is coming from and how much wiggle room you have for the purchase. If possible, try to pay off debt you’re already carrying — or at least pay it down — so you can keep your debt-to-income ratio low.

Check Your Credit Score

Your credit score will impact the interest rate and terms lenders will offer you. A lower credit score could mean you end up with less favorable terms that increase the overall cost of your purchase or the size of your monthly payments. For that reason, you'll want to check your credit report for any errors and get them corrected before applying for a car loan.

If your credit score is low, you might want to postpone your purchase and create a plan to raise your credit score. But there are steps you can take to buy a car with bad credit if waiting isn’t an option.

Take Advantage of Pre-qualification and Pre-approval

Dealerships can handle financing for you at the lot, but they don’t always offer the best terms. You can save money by shopping around for financing and taking advantage of pre-qualification or pre-approval. When you arrive at a dealership with financing in hand, the dealership either has to accept your financing or beat it.

You can find financing for an auto loan through banks, online lenders, and dealerships, but generally credit unions offer the best rates.

Credit unions require you to join to take advantage of their rates. You can become a member by opening a checking or savings account. You may even get additional savings by setting up autopay on your car loan from your credit union account or insuring your car through your credit union.

Don’t forget to bring up your old car at this stage if you’re planning to trade it in. Your lender may have a preferred process for handling trade-ins, and this can affect the amount of your pre-approval.

Choose a Car

Maybe you have a car in mind — a family sedan, a sturdy truck, or even a dream car. But making the car in your head a reality in your driveway requires a few steps.

Find the Real Cost of Your Car

Buying a car involves the car’s price, but also ongoing costs like insurance, fuel, and maintenance. You’ll need to consider the true cost of a car to make a purchase you’ll be happy with long term. After all, a cool car you can’t afford to fuel or keep running isn’t going to be fun sitting in the garage.

Keep in mind that foreign or luxury brands not only cost more to maintain, but may also require travel to find mechanics who can work on them. They may additionally cost more to insure. Ultimately, you’ll be happiest with a car that fits your lifestyle and that you can comfortably afford.

Choose Whether to Buy Overseas or Domestically

Today’s technology means you’re no longer restricted to local car dealerships. Buying nearby is convenient, but expanding your search nationwide can open up options and prices that aren’t available just down the road. And as a servicemember, you may be eligible to buy from overseas as well.

Consider a Car Buying Service

Exploring nationwide — or global — markets takes time, but it doesn’t have to if you choose to use a car buying service. You can search a wide variety of makes, models, and options from one website — and all without the pressure of dealing with sales staff.

Car buying services are about more than convenience, though. Programs like PenFed’s offer additional benefits like exclusive discounts with major manufacturers, discounted loan rates, and cash incentives.

Secure Your Financing

Whether you go with a traditional bank or credit union or choose an online option, it’s important to choose a reliable auto lender. You’ll have an easier time choosing a good lender if you’ve considered the kind of loan conditions you want.

Decide on a Down Payment

Traditionally, lenders expect you to put 20% down on a car, although you can buy a car with no down payment. However, a down payment lowers the cost of your car by reducing the amount you need to borrow and the length of time you’ll pay on your auto loan. It’s usually better to put down something, even if it’s not a full 20%.

Consider Loan Terms

Longer loan terms often mean smaller monthly payments, but they also lengthen the time you spend paying on your loan, resulting in more interest. Making larger monthly payments is one way to pay off your car earlier and avoid getting upside down in your loan.

Establish the Total Cost

Dealers focus on monthly payments to make cars feel more affordable. But small monthly payments stretched over many years can add up to a lot! 

Instead, focus on the total cost of your loan — including fees and interest charges — to get a real sense of what you’re spending. The total cost is the most accurate way to compare different lending options and find the best one for you.

Beware of Loan Restrictions

Some lenders have restrictions on whether you can take your vehicle to another state or country. Be sure you understand restrictions like this, and whether there are exceptions, before you sign on the dotted line.

Decide Whether You Need a Power of Attorney

You may need a power of attorney if you plan to own your new vehicle jointly with a spouse or other family member. A power of attorney will enable your family member to make decisions on your behalf when you can’t be present. That could include finalizing a car purchase or sale, changing insurance, and other necessary decisions surrounding your vehicle. 

The Takeaway

Your post-deployment car buying process doesn’t have to be a hassle. With a little planning, you can streamline the experience and ensure you get a great deal to boot.