Do military get discounts on cars? Yes, they do. Virtually all major brands such as Ford and Toyota do this all-year round on specific models. In most cases, banks and other mainstream credit lenders offer low-interest military auto loans.
Should you apply for one? Let’s find out more…
1. Buying a car while in the military
How does military auto financing work? It works just like a typical auto loan. Banks and credit unions offer this credit to active and retired servicemen. Smaller lenders also offer this service though you’ll notice that the interest rates are higher compared to well-established banks.
What are the requirements for applying for auto financing military?
- Proof of identity
- Proof of military service e.g. copy of military ID, retirement or discharge letter.
- Credit report
- Copy of Driver’s License
2. What are the pros of getting a military auto loan?
1. Your family also enjoys awesome perks
Do you have a son or daughter who’s about to join college? Perhaps they’ve been pestering you all year round for a new car but you can’t seem to find a good lender. In most cases, banks cannot offer auto loans to young adults due to insufficient credit histories. Does that mean your child can’t get a new car?
Not at all! Military credit benefits extend to your direct family members. They get to enjoy the same perks you get such as special discounts and interest rates. Your boy or girl will confidently approach your bank and get the best financing deal for their first car. That’s cool, isn’t it?
2. Enhances your ability to lower monthly payments
Banks to Auto Manufacturers’ special discounts, you can get a better car than you had anticipated. For instance, you’re planning to get a BMW X6 that costs $65,000. So, you save up $25,000 as down payment and apply for a military loan.
Fortunately, the sales rep informs you that you qualify for a 15% manufacturer’s discount. Now, the price drops from $65,000 to $55,250. This is good news because the discount enables you to reduce your monthly payments by reducing the loan principal. Let’s look at a real-life example.
You get a lender who’s willing to offer you financing at 3% interest over a 5-year period. If you approach a normal lender that doesn’t offer military financing, your loan principal amounts to $40,000. How did we arrive at this figure? By deducting your down payment ($25,000) from the car’s original price ($65,000).
At this rate, you’ll pay $719 each month for the next five years. What happens when you approach a military-friendly car loan lender? First, your loan principal drops by a huge margin. If you get a 15% discount, the car’s price drops from $65,000 to $55,250. When you do the math with a car loan calculator, your new monthly payment is just $544.
3. Enables you to get a new or used car
Thanks to the special discounts offered by both the auto manufacturer and car dealership, you can meet or even surpass your expectations. If you thought that it would take you another year to afford the truck you’ve always wanted, you might actually achieve the dream in less time. All you need to do is find the right dealership.
Do you have a family? One of the biggest concern for parents is the vehicle’s overall safety. When you apply for this form of financing, you can upgrade to better cars after every three or five years. It’s actually easier to do a trade-in because the process might take less than a couple of days.
4. Fast application and loan processing
As a customer in a highly competitive industry, you’re surrounded by hundreds of creditors garnering for your attention. Each creditor understands your urgent need of owning a new car. Especially when it’s a new season and you want to get that highly anticipated pickup truck that’s causing a stir in various online forums.
How long does it take to get your loan application processed? Some lenders do it in just 24 hours! You can submit your application on a Monday and buy a new set of wheels by Thursday of the same week. This is quite convenient because it enables you to enjoy fantastic offers on Black Friday and other popular national holidays.
5. You can refinance whenever you want to
Refinancing enables you to slow down on making costly monthly payments so that you can have enough money for other priorities. Like getting a college or Masters degree for career advancement. You still retain your car without damaging your credit score.
Most lenders that offer military auto loans also offer refinancing plans. Why is this popular? Because sometimes refinancing a loan is necessary when you realize that the car’s insurance is a bit expensive and you don’t want to spend most of your monthly income on car expenses.
3. Military auto loans bad credit
Can I still get financing if I have a bad credit score? Yes, you can. You’ll come across small and medium-sized credit lenders near you that can put together a military car loan with a more relaxed stance towards credit ratings. The minimum score you can enroll with varies from 500-550.
Some creditors offer a slightly different type of financing known as secured car loans. How does this work? A lender offers to provide a car loan to a debtor as long as he or she hands over a valuable collateral asset. This happens when the buyer’s score is less than 500.
4. Where can I get military car loans no credit?
You can get financing for a new or used vehicle through inhouse financing without submitting your credit report. This form of financing is legal because it’s government-approved and lenders comply with current interest rate regulations. It also helps you establish a long-term customer-seller relationship with a car dealership that always has high quality cars.
On the other hand, you can apply for an instant approval military car loan online. These creditors have high processing rates that enable customers to get approval within a day or even less time. However, one has to exercise great caution due to the high number of unlicensed lenders known for unethical practices.
5. What are the cons of bad credit and no credit check military car loans?
1. Expensive interest rates’
Where there’s a thriving market with constant high demand, you’ll always find a few shady sellers looking to con customers. Truth is, some bad credit lenders out there use bait and switch adverts that lock clients into long repayment periods with expensive interest rates.
2. Some dealerships limit your choice to used cars
One of the ways auto loan lenders use to mitigate the risks of loss when dealing with bad credit debtors is by providing used cars only. Doing this enables them to lower the amount of loan principal you receive and come up with a feasible repayment plan for your situation.
Let’s face it. No one feels proud of buying a used car for the second or third time. Plus, you might have to spend extra money doing replacements or fixing issues that developed after riding around for a few months.
Suggested read: Trading in a car with an underwater loan
3. Costly car recurring expenses
Bad credit loans also come with costly interest rates. So, you’ll also expect to make high monthly payments compared to a buyer with an excellent credit score. Let’s look at a practical illustration.
Auto finance lenders usually offer loans at 5% to buyers with good credit scores. If your colleague who has a credit score applies for a loan worth $25,000 and gets a 5-year repayment period, each monthly payment amounts to $472.
On the other hand, you have a credit score below 550 and decide to look for an online lender. You receive the same principal and repayment period as your friend. However, your lender expects you to repay at a 12% interest. How much is your monthly payment? $557.
4. No guarantee of credit score improvement
A majority of small and medium-sized lenders specializing in bad credit don’t report loans to credit bureaus. So, while you make your monthly payments on time, the car loan has no impact on your credit score.
5. High risk of running into unlicensed online creditor
Due to the ease of creating and hosting websites, several types of creditors have easy entry into the auto loan market. However, not all of the websites you see on Google have fully complied with the CFPB credit lending regulations.
These unlicensed creditors will most likely switch up the interest rate six months into your loan. Then, they might introduce hidden fees when you’re just a couple of payments away from receiving your car title. To make matters worse, you won’t see any improvements in your credit score since an unlicensed lender cannot open accounts in credit reference bureaus.
6. Makes it hard to do a rollover
Did you know that you can trade in a car that has an outstanding loan balance? Credit lenders and car dealerships clear your outstanding balance with your previous seller. Then, your outstanding balance gets rolled over to your new car purchase.
This method is advisable when you have less than five payments to make and you have a fantastic interest rate. However, it’s impossible to trade in your car when you bought it using bad credit financing. Why is it difficult? Because of the high interest subjects you to expensive monthly payments. Rolling them over to your new car might make your car purchasing decision too expensive.
Suggested read: What you should know before applying for an auto loan
6. Is leasing a better option?
Just like auto financing, you’ll find many car dealerships offering discounts or special benefits for active or retired military personnel. In most cases, the lease period expires after three years. Some auto manufacturers also offer special military lease deals on specific models all-year round. This enables you to apply for one when the need arises.
What are the pros compared to a typical car loan?
1. Drive the latest car after every three years
The average lease expires after 36 months. As the lease expiry date approaches, you can spot some of the latest cars that you might want to enjoy for another similar period. This way, you get to enjoy the best engine performance, safety, and entertainment features at a more affordable price than applying for a subsequent car loan.
2. Avoid costly maintenance expenses
If you’re only in the country for less than three years, you can still apply for a 24-month car lease. This is the best option if you just want to enjoy the ride without paying for maintenance. If you comply with the mileage limit, the car tires will still be in excellent shape when returning your car to the dealership. You also won’t need to get a new battery.
3. Ideal for soldiers who travel frequently
Perhaps you’re one of the guys who gets posted in several countries due to outstanding performance. If you tend to stay home for two or three years, getting a car lease can help you move around conveniently.
What are the cons?
1. Limited to customers with good credit scores
Car dealerships limit this service to clients with good credit scores due to the number of costly monthly payments involved.
2. Expensive monthly payments
Car leases are designed for high-end clients who want to sample a variety of luxury cars. You also have to get a full cover for your car during the entire lease period. It’s not advisable to apply for a lease when the car payments and expenses exceed 25% of your gross income.
3. You can’t trade in your car
Once the lease period expires, you either return the car or renew your agreement. It’s impossible to trade in a lease car in order to buy a car or get an auto loan. If you suddenly get a windfall of cash, one has to wait out the lease or return the car before time and pay expensive fines.
7. How to spend less time and energy looking for auto financing
1. Establish a relationship with military-friendly credit lenders
Your friends probably receive their paychecks through military-friendly banks that offer pre approved auto financing. Switching banks only takes a day but the benefits will last for several years.
The right banks will process your application within a few hours because they can pull up your statements from their system in just one click. You won’t have to worry about losing credit score points since the bank or credit union does soft inquiries when determining pre approved car loans.
2. Apply for a reasonable loan principal
Banks and credit unions won’t take you seriously when the loan principal isn’t within a reasonable range compared to your annual gross salary. As we’ve said earlier, your car monthly payments and recurring expenses shouldn’t exceed 25% of your gross income.
3. Work on your credit score
Good credit scores attract affordable interest rates. If your score is below 550, work on clearing your current debts without taking on new ones. Also, ensure your creditor receives monthly payments on time.
4. Shop for the best lender
As a customer in need of auto financing, you don’t want to spend most of your money repaying the loan. Find a lender who has a better interest rate than what other banks or credit unions have to offer so that you can choose a shorter repayment period than 60 months.
5. Use a car loan calculator before accepting financing
A car loan calculator enables you to determine the impact of your down payment on monthly payments. You also see how switching to a longer repayment period can get you the right installment. Plus, it enables you to verify the payments printed in the dealership’s repayment plan.
Get that new car today!
Military car loans are great because the benefits also extend to your family. It’s also a great way of improving your credit ratings due to discounted loan principals and affordable interest rates compared to ordinary car loans. Plus, most banks and credit unions give you a longer grace period to sort out your finances when you notify them of a late payment.