You do not need to be in the military to understand the importance of lower interest rates on new and used car loans. To get an idea of how important getting a lower interest rate is, we can look at two different car financing scenarios and do the math for ourselves.
A $10,000 vehicle being purchased with a five-year loan at five percent interest would have an approximate monthly payment of $190.00. If we drop the interest rate to three percent, then the amount drops to about $180.00 per month. By cutting the interest rate just two points, we were able to save a total of $600 on the full cost of the auto loan. The more you pay for your vehicle, the more you can save on the total cost of your loan with a lower interest rate.
You May Qualify For Special Discounts
Many lenders who have special service personnel military auto loans programs and offer discounts and promotions to help lower the cost of the loan. You may be able to qualify for a half-point reduction in your interest rate, or you might get free oil changes for life. The perks can vary from lender to lender, which is why it is a good idea to shop around for your auto loan and get the best deal possible.
Your Chances Of Being Approved Are Much Higher For Military Car Loans
Lenders participating in this type of auto loan program tend to make it easier for military personnel to qualify for loans than civilians. There are several factors taken into account for a military member that can have an effect on his pay and some of his other credit considerations. For example, a deployed soldier may qualify for combat pay, which would raise his income and allow him to be eligible for a car loan.
As with any unique feature on your auto loan, these special approval considerations vary from lender to lender. When you are shopping around for the best car loan, be sure that you ask about your eligibility for financing based on your military pay and your position.
Your Down Payment Will Be Less
Another area where some lenders like to stretch things for military personnel is in the down payment requirements. An active duty soldier can sometimes find it difficult to make ends meet while deployed. That means that putting together a down payment for a vehicle when he gets home is not always easy.
Many service-related auto loan lenders are lenient on their down payment requirements and some even waive the need for a down payment altogether. When you are sitting with a loan officer to discuss your auto financing, be sure that you ask about the down payment and whether it is necessary in your case.
Your Repayment Schedule Could Be Longer
The average civilian auto loan runs anywhere from 36 to 60 months for repayment terms. With military status, those terms could be as long as 65 to 70 months, depending on the lender.
This is another situation where the unique circumstances of an active duty soldier make it necessary for lenders to create special conditions. A soldier could be deployed and in active combat for some time, and it would be tough for that soldier to make his car payment while he is serving his country.
With these extended repayment terms, the soldier can come back and know that he is still able to pay his car loan on time. When banks extend repayment terms, that tends to lower monthly payments. It is another way that different conditions for military personnel make things easier for the soldier and his family.