The Bureau of Consumer Financial Protection has continued its series of guidelines specifically addressing servicemembers’ purchases of automobiles. Recent posts on the Bureau’s blog have provided advice for servicemembers on shopping for auto financing, options for buying new cars versus used cars, as well as recommendations on how to trade in a vehicle.
With regard to auto finance, the BCFP advises servicemembers to shop around for financing terms rather than only considering the financing options offered by dealerships. Instead, the BCFP suggests that servicemembers contact multiple banks and credit unions, and that they ask about specific military discounts that might be available. The BCFP also highlights the importance of the annual percentage rate and the length of financing available.
In the new versus used car debate, the BCFP suggests that servicemembers consider buying a used car rather than new. The BCFP outlined the following factors to consider before buying:
- How a vehicle responds under varied road conditions;
- Researching the availability of Certified Pre-Owned (“CPO”) vehicles;
- The vehicle’s maintenance record;
- The value of the vehicle based on the Kelley Blue Book, Consumer Reports, and the National Automobile Dealers Association’s guides;
- Upkeep costs; and
- Unrepaired recalls.
The BCFP also encourages buyers to rely on the Buyers Guide, required under the FTC’s Used Car Rule. Notably, the FTC recently updated the Buyers Guide and mandates that all used motor vehicles display the form. Additionally, the BCFP encourages any servicemember who plans to buy a new car to shop around, negotiate on price, and order a car if a dealership does not have a car that meets their needs.
Finally, for those who intend to trade in their vehicles, the BCFP advises servicemembers to know the value of their cars, noting that dealerships are open to negotiating a trade-in value. However, the BCFP cautions against trade-ins where a servicemember has negative equity, recommending that they consider postponing purchases until they are in a positive equity position or consider selling their vehicles themselves. For those members of the military who decide to proceed with a negative equity trade-in, the BCFP suggests that they ask how negative equity would affect their financing and to keep the length of the new financing term as short as possible