3 Things Nobody Tells You About Buying a CarBuying a new car is among life's sweetest moments. But if you are unprepared for the significant financial responsibility that comes along with the purchase of a new or pre-owned vehicle, you could be in for a bumpy ride. At Phil Long's Military Auto Exchange at Fort Carson, the first-ever dealership on a military post in the state of Colorado, education is a central mission. The innovative new dealership, opened in April and staffed by Phil Long salespeople who have all served in the military, is uniquely tailored to serve soldiers. "Our sales team at the Military Auto Exchange all speak the language and know the challenges of military personnel," says Jim White, partner and general manager, Phil Long Ford, Chapel Hills, Colo., who heads the new Fort Carson dealership. "We want to make sure we are taking care of soldiers."
In recent years, the Office of Servicemember Affairs at the Consumer Financial Protection Bureau, among other groups, has sounded the alarm about unethical car dealers and financial firms that target military personnel. Their youth, steady paychecks and lack of credit history can make them vulnerable to deceptive or predatory sales practices.
A young soldier straight out of basic training may not be prepared for the automotive buying experience, White says. The Military Auto Exchange reaches out to help these buyers, providing information about the transaction, what they can expect, how to handle insurance and how to make a sound buying decision.
Three facts of automotive life that White and others say all first-time car buyers should keep in mind before signing on the bottom line:
1. Cars are costly New cars can cost a bundle and these days used vehicles are in high demand and command top dollar, too. The average transaction price for a new vehicle was $32,804 in the first quarter of 2014, according to CNW Research, Bandon, Oregon. By comparison, the cost of a used model in May was $15,467 from a franchised auto dealer and around $7,519 from a private party. Tip: Search for what you can afford. A monthly car payment should not be more than 20 percent of your total take home pay, according to Edmunds.com
2. Operating expenses add up Buyers often fixate on the upfront cost of a car, but it's the day-in, day-out expenses to keep it on the road that can pose less obvious hurdles for a first-time buyer. The AAA says motorists spend an average 59.2 cents per mile or $8,876 per year, based on driving a typical midsize sedan 15,000 miles annually. Multiply that amount by five years and that's a total of $44,380 in operating expenses. Choosing a comparably priced model that costs 10 percent less to own could save a motorist around $4,438. Tip: Buying a more costly model that delivers top fuel economy and costs the lowest to finance, insure, maintain and repair over the years can be the best decision. KBB publishes a yearly 5-Year Cost to Own awards in different vehicle classes, identifying the most affordable rides.
3. Some vehicles lose their value more quickly than others Depreciation, or how well a given model holds its value over time, based on a variety of economic factors and historical data, is an important thing to consider when buying a car. According to KBB, the typical 2014 model car will retain only around 39.7 percent of its original value after five years on the road. This means the average new car that sells for $50,000 today would be worth around $19,850 after five years. By comparison, a similarly priced model that's expected to retain an additional five percent of its original value after 60 months will put an extra $1,600 back into an owner's pocket at trade-in time. Tip: Always consider similar cars in a particular class, not just the model you fall in love with.
White, whose father was formerly a military officer at Fort Carson, says he's pleased with the new dealership's performance. About one-third of soldiers served at the Military Auto Exchange have been first-time car buyers, he says. About 60 percent of the 100-plus sales so far have been pre-owned vehicles. "Fort Carson is a close-knit community, and if they like the way they're treated they are quick to share with friends," White says. They get a warm welcome. The dealership was founded in 1945 by Phil Long, a returning WW II U.S. Navy fighter pilot. Today, one-third of the company's employees are former military or related to or associated with military families.
"A lot of our customers at the Military Auto Exchange are straight out of basic training, or have been assigned to Fort Carson from somewhere else," says White. "We think they're best served by people who have been in the military, at a dealership near their home."