Guide to Auto Loans and Car Buying for Veterans
Veterans may be eligible for special financing and discounts when it comes to car loans and other fees associated with car ownership. These discounts can help make buying a new car more accessible to recently discharged veterans or active duty service members.
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Veterans and current military personnel face unique financial challenges, both during and after their service. According to Pew Research, 27% of veterans found it difficult readjusting to civilian life. One such adjustment that vets may find difficult is managing new financial responsibilities at home, such as purchasing a car.
With any big car purchase, you’ll want to do your research, not just on price points or purchasing assistance, but other important variables. These could include your purchasing power, identifying your needs versus wants, finding a reliable dealer, and accounting for intrinsic costs, such as maintenance. Whether you have family or spousal support, or are now balancing a household budget solo, this guide can help provide you with the resources you need for saving for a car and managing an auto loan as a veteran.
Is There VA Assistance for Buying a Car?
There are currently no general Veterans Affairs (VA) programs centered around helping vets purchase a new vehicle. However, there are specific programs that exist to cater to veterans facing extenuating circumstances. For example, the VA Automobile Allowance and Adaptive Equipment program assists anyone with a disability due to military service that hinders them from driving. This helps veterans with disabilities purchase vehicles that are adapted to their needs.
How To Pay for Your Car
Multiple factors go into the final price of a vehicle. These factors include the down payment, dealership fees, loan interest, and intrinsic costs. Unless you’re purchasing a car in cash, which is uncommon, you’ll want to know what you can afford for each of these factors, to create a realistic budget when searching for your new vehicle.
Know What You Can Afford
Several considerations go into knowing how much car you can afford. First, how are you planning on buying a car? If you intend to use financing options like auto loans, your budget can vary widely depending on things like:
- Your credit score
- Outstanding debts
- Current income
- Your down payment
- The length of your loan
You can use tools like auto loan calculators to get a closer idea of how much you could borrow, or afford.
If you’re planning on buying a car with cash, then there are other unique factors you’ll need to consider when it comes to making a budget. One of the pros of buying a car outright is that you won’t have any monthly payments.
It’s important to make a budget before you even start looking at cars, so that you know, realistically, the kind of car you can afford, and you lower the risk of over borrowing for luxury add-ons you don’t need.
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Leasing vs. Buying
Leasing a car gets you into a new vehicle, without committing to buying it. This can be a popular option for active duty service members, who change stations every couple of years. When you lease a car, you’re essentially renting it from the dealer. While insuring a leased car may be more expensive, due to the amount of coverage you could need, you won’t have to worry about paying interest on a loan, and you have more flexibility if you’re deployed. Another pro of leasing a car is that you may be able to upgrade to luxury models, particularly if you’re leasing for a short time.
However, it’s important to note that if you get in an accident while leasing a car, the repairs, either to yours or other vehicles involved, may not be covered by the insurance, and you will still owe the dealer the car’s worth. This is where things like gap insurance come in handy when leasing a car. In the long run, if you’re planning on owning a car for several years, leasing is ultimately the most expensive option.
Understand Refinancing
Refinancing a car loan is a way to lower your overall monthly payments, while keeping your loan in good standing. When you refinance a loan, you’ll often be offered a lower interest rate, which is what lessens the monthly payments. However, it’s important to read the terms of a refinancing agreement as carefully as you read your initial loan. A lender may offer you a much lower monthly payment, but for a much longer loan period. This, overall, won’t save you that much money.
When considering if you should refinance your auto loan, you might ask yourself the following questions:
- What are the lifetime savings if I refinance?
- Do I have a high enough credit score to get favorable terms?
- Do I need to refinance immediately, or can I wait for more favorable circumstances?
It’s important to note that refinancing a loan is, essentially, taking out a new loan, as you’ll be subject to new terms. This means the terms are largely based on your credit score. If your credit score hasn’t improved since you took out your original loan, then it may not be worth refinancing your car loan, as you’ll likely be offered the same interest rates.
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Auto Loans With Discounts or Special Rates for Veterans
Certain lenders offer special discounts or rates for veterans who borrow from them. While this isn’t an incredibly common practice, by shopping around for the right lender, you can find a better rate as a veteran. Here are some lenders that offer these rates:
- PenFed Credit Union
- Navy Federal Credit Union
- USAA
It should be noted that these special rates are typically offered only to honorably discharged veterans, and that you may need to provide proof of this status to qualify for them.
Dealerships and Manufacturers With Discounts for Veterans
Certain car dealerships or manufacturers will offer discounts on the base price of the vehicle for veterans. Or, they may discount or waive certain fees associated with purchasing a new car. Manufacturers that offer these deals include:
If you cannot find these dealerships near you, you may check if your local seller of these models offers similar discounts.
Breaking a Car Lease While in the Military
If you’re an active duty service member who is deployed or relocated, the
Because of this resource, some active duty service members prefer to lease their personal cars, rather than purchase them outright, as you are still financially obligated to make any minimum loan payments you’ve agreed to, even while deployed.
Other Costs of Car Ownership
The price of the car, or the cost of your monthly payments aren’t the only recurring car payments you’ll have to think about. Regardless of whether you buy new or used, purchase through financing or with cash, these costs will be unavoidable for the lifetime of the car.
Insurance
Insurance is an intrinsic cost of car ownership that is required in many states. However, many auto insurance companies offer veteran discounts or special rates, which can reduce the price of your premium. Sometimes, insurance companies offer specific plans tailored for veterans and active-duty service members — such as Geico's military car insurance coverage. Military-specific insurance plans take the unique challenges and lifestyles of active duty service members and veterans into account when creating coverage. Other insurance companies that offer veteran-specific discounts or plans include:
- USAA
- Allstate
- Farmers
- American Family
If you currently have car insurance with a company not on this list, you may ask if they offer a veterans discount, as some companies have these discounts, but they aren’t officially listed on their discounts page.
Fuel and Maintenance
Fuel and maintenance are intrinsic costs of owning a vehicle. However, you may be able to lower these costs depending on the type of vehicle you buy. For example, buying an electric or hybrid vehicle can help severely cut down on fuel costs, and in some cases eliminate them.
Some automotive companies may offer veteran-specific discounts on services or parts. You may be able to find these discounts online, or can ask at your time of service. As a veteran, you may even have auto-mechanic experience, and find it cheaper to perform their own maintenance on their vehicles.
Registration
Typically, you have to pay a fee to register your vehicle. However, if you’re being relocated due to a permanent change of station (PCS) order, then your registration fees may be waived. This varies from state to state—in fact, in some states, you aren’t required to register your vehicle with the local DMV as long as your registration is valid in your home state.
If you still need to register your vehicle in a new state, you may be eligible for discounts, provided you can present your PCS order, or other necessary paperwork.
Other Programs To Help Veterans Afford a Car
Other programs that can help veterans and their families afford a car, through various financing and special offers, include:
- TrueCar Military Car Buying Program: The TrueCar military buying program offers financial assistance to veterans looking to purchase a car. You can view the type of assistance available, as well as the eligibility requirements of this program on their website.
- Progressive’s Keys to Progress: The Keys to Progress program from Progressive is a vehicle giveaway event, designed to help veterans in need of vehicles. This event happens once a year, every November. You can find the application for this giveaway, as well as volunteer opportunities, locations to drop off donations, and more on their program page.
- Vehicles for Veterans: Vehicles for Veterans is a 501(c) non-profit that donates vehicles and provides financial support to disabled veterans. They accept and donate several kinds of vehicles, including cars, boats, RVs, and motorcycles.
- Vehicle Grants for Veterans: There are several grants available for veterans looking to purchase a vehicle. These grants can help lessen the financial load of a new vehicle purchase.
Get Government Grants has a list of grants veterans can apply to.
Veterans and active service members can lean on any of these resources to make getting a vehicle easier. Vehicles often represent independence, freedom, and personal choice, and are therefore an important part of civilian life.
