Buying a Car in the Military: New vs Used Tips, Strategies, and Advice | Military Money Manual Podcast Episode 41

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Buying a car is usually the largest purchase of a young servicemember. Take some time to think through the decision. Even saving 10% can add up in a big way. I cover buying your first car in the military my book The Military Money Manual: A Practical Guide to Financial Freedom.

In this episode, Jamie and Spencer talk through their car buying process and what to consider when making a large purchase.

Military Money Manual Podcast Episode #41 Links

• Free 5-day course to maximize your travel benefits and learn all about military credit cards
• The Military Money Manual book
• Jamie’s Car Breaks Down, Four Seasons Lanai, and the New Book! Military Money Manual Podcast Episode 01 Show Notes

Military Money Manual Podcast Episode #41 Transcript

[00:00:00] Spencer: Hey everyone, Spencer Reese here from MilitaryMoneyManual. com. Today's episode of the podcast is about how to smartly buy a car on the path to financial independence or when you're purchasing your first car after just joining the military. I founded the Military Money Manual in 2012 to share everything I learned about personal finance during my military service.

And last year I released my book, which is 119 pages of financial freedom goodness, The Military Money Manual, A Practical Guide to Financial Freedom. And it's available now on Amazon and my website at shop.militarymoneymanual.com. I'm here again today with my co host Jamie to present today's episode.

Hey, Jamie.

[00:01:11] Jamie: Hey, Spencer. Thanks. So we got a question from Anthony on Instagram. We love getting questions and thanks everyone for the questions and comments. Keep sending them. You can send them to us on Instagram @militarymoneymanual or email info@militarymoneymanual. com. 

So Anthony asked. Or he wrote a Spencer.

“I love your podcast. I've listened to every episode. Y'all have put out any advice on the vehicle purchasing process. We'd like to hear your thought process on that.” 

So thanks Anthony. For the question before we really get into answering it though, I'm excited about this episode topic because we love helping people avoid big mistakes.

And young service members, especially, have a lot of marketing dollars thrown at them, trying to get them to spend too much on their first car.

[00:01:57] Spencer: Yeah. There's the classic tale of most squadrons or companies where the E-4 will pull up in the brand new Mustang with the 29 percent interest rate.

And then you see the wise old Lieutenant Colonel who is O-5 who's driving a 12 year old champagne colored Honda Civic that they were driving when they were in college. And I actually talked about that a little bit in my book, The Military Money Manual. And, I had one of the lines I put in there and I think it's still true. At the end of the day, no one cares about what your car looks like, how fast it can go, how much power your engine has.

Unless you're a car person, then just spend your money on a car that brings you joy and if cars don't bring you joy and you just see them as a complete utility and a way to get from point A to point B, then spend your money somewhere else. I think the main driver of this episode, cause I think a lot of personal finance gurus or whatever we're calling ourselves these days.

Advisors, the car thing is it's like the latte, right? Where it's like, Oh don't buy that latte. If you save $5 a day, you'd have a million dollars a hundred years from now. And it's dude, I want to buy a latte. Like just let me buy my latte.

And it's the same thing with the car. If you're a car person, you're probably already turned this episode off. Cause you're like, Oh, here we go again. Someone berating me for spending a hundred thousand dollars on a Ford F-150 Raptor. But hey, if you, if that brings you joy and every time you get into your F-150 Raptor, you're like, Oh, this is awesome.

Then do it. If that brings you joy, then do it, but just make sure your spending is aligned with your priorities. And I think for a lot of people, I know for myself, when I joined the military, I had a used car and cars have never been my thing. Like I've never. Gotten joy from driving a really nice car.

Sometimes I'm like, yeah, this is nice, like driving a BMW versus a Mazda. But if it doesn't, if you're spending isn't aligned with your priorities, then you need to make an adjustment. And if driving a really nice vehicle isn't aligned with your priorities, then you don't feel pressure to go and buy too much car. 

So my three main takeaways today are don't buy more car than you need and buy the car that's right for you. Not the one that you think you should drive based on society, based on marketing, based on your friends or whatever. And then number three, used cars are perfectly fine, but I found, and this is my personal experience, that new cars can be a better long term, I don't want to call it an investment, but a better long term purchase.

There's this great subreddit out there called buy it for life. And they talk about items that you can basically, they're, there's such high quality goods that they might be a little bit more expensive, but you can essentially buy them and then you'll be able to use them for the rest of your life.

And usually that's not true with a car, but I have found that when I had a used car, yes, the initial purchase dollar amount was much lower than a new car, but the headache of the repairs and keeping it running. And just not like never knowing that if we went on a long road trip, like, where are we going to make it to the end without having some kind of breakdown?

And actually this car, I think it was this, yeah, it was this one where we were in Oklahoma on TDY and we were driving to Texas to visit some family and the air conditioning stopped working in the middle of summer in Oklahoma and Texas. And it was brutal. Like it was absolutely terrible. And so if we had a new car, which we eventually later did purchase.

Then we probably wouldn't have had that problem.

[00:05:40] Jamie: Yeah. Just remember though, like we talked about in past episode, actually episode number one, where we talked about my car breaking down, we bought that car new, it was a couple of years old at the time, but they have recalls and stuff comes up with new cars sometimes too, but I guess to get directly after Anthony's question, do you have a specific process you turn to each time you need to buy a car or like a checklist or a step by step guide to walk you through that?

[00:06:04] Spencer: Yeah, sure. Unless there's like a specific vehicle that I'm really excited about. And, I just went on this whole rant about how I'm not a car person, I have just driven a couple of Teslas and I'm at that point now where I am thinking about, yeah, I do want a Tesla. They're, they are pretty sexy.

But in general, like when I first got into the military and I just needed a car to get me from my apartment to base during pilot training, my process was basically, I started with consumer reports. So I think it was like, I think it's $20 bucks. A year, $20 bucks a month. I can't remember what it is, but it's pretty cheap.

Sign up for consumer reports. You get access to all their reports and you can look at the reliability ratings of used cars or new cars for that matter. And you can notice some trends. So there's usually the most reliable brands out there. You're your Japanese cars like Honda, Toyota, Mazda.

And once you dial in on which brand you want and which model you want, then if it's a new car, you can, when I went to go purchase a new car in 2014, I think is when the last time I bought a new car, I took the exact make and model I wanted, and I emailed us all the Mazda dealer, it was a Mazda three.

I emailed all the car dealerships, Mazda dealerships in the area. I was in Tacoma, Washington. So I went from Portland, Oregon, all the way up to Seattle and then North of Seattle as well, and then out to Eastern Washington a little bit. And I just said, Hey, this is the exact car I want. And what can you get it for?

Or what price can you sell it to me for? And I had, I think two out of the four dealerships get back to me. So right there, after two of the dealerships didn't get back to me, they made it clear that they didn't want to sale. And so then I just emailed the two dealerships that did get back to me and said.

To the one that offered me the highest price, Hey, I have an offer from another dealership. I didn't mention the name. And I said, can you beat their offer? $21,500. And the second dealership said, no, we can't beat that. So then I went to the first dealership and said, great. Hey, I'll buy the car from you for $21,500.

The other thing I'll mention is if you do buy a used car, it can behoove you to have a mechanic look at that? And usually that's just as simple as asking the dealership or the private party. If you're buying it from someone else to say, Hey, can I, drive it down to a local mechanic, make an appointment and see if they can Just take a look at it and make sure there's nothing glaringly, obviously, structurally wrong with it.

And the other thing you want to do as well is, just look at a CARFAX or some kind of VIN report to see if it's been in any accidents.

[00:08:54] Jamie: Yeah the money that you spend to get access to CARFAX, some military bases will have access to that at the Family Readiness Center. I've seen that before.

And the money it costs to have a mechanic look at it. You say you spend $200, but they discover something that would prevent you from buying a lemon or a car that was going to give you thousands of dollars in repair issues in the next couple of years. So that's a good investment and a good use of your time and money there.

You mentioned Spencer leveraging dealers against each other. Currently right now, in early to mid 2022, the car markets probably don't quite have the same kind of leverage that you had 10 years ago buying your Mazda that you have. Now, most places aren't really negotiating anymore, but hopefully that comes back again soon when the market levels out.

[00:09:44] Spencer: Yeah, it's definitely. If you have any opportunity to delay a car purchase at the moment, it's probably a good idea to do that. The, yeah, one of the biggest drivers of inflation for the last couple of months and last year was the used car market, which has cooled off a little bit and it's starting to come down, but it's definitely a tough time to be out there buying a car.

And so I would advise that if you, Are in the market to buy a new vehicle or your first vehicle, anything you can do to delay it might make sense, renting a vehicle can get very expensive and you definitely want to. Buy something rather than renting it.

[00:10:33] Jamie: Yeah, you might be able to just get a cheaper car temporarily until the market calms down. Like maybe you target something at the five to ten thousand dollar price range instead of the twenty to thirty thousand dollar price range and that kind of Is a different market and a different inflation, a different demand signal in, in different price points. So maybe that can help. 

Another thing you mentioned already, I think you mentioned consumer reports. So what are some things I'm looking for as I look at reviews online, consumer reports, and all the information that's out there about cars as I look at which one I would like to buy.

[00:11:09] Spencer: Yeah. The things that I looked at were the long term reliability, it just, if not of the specific model, then of this specific brand.

And you'll know too, that sometimes the car manufacturers will change the model and immediately like lots of problems crop up. So like from, I can't remember what year, maybe it was 2017, 2018 Mazda changed the design of the Mazda 3. And immediately, like they started having all these problems crop up just because they changed the design a little bit.

And so new things started breaking on the car. And so sometimes, that's just what happens when you have a new design and you need to wait a couple of years for it to smooth out. But in general if you talk to Jamie and my parents generation, like cars have become so much more reliable across the board, whether it's a, a Ford, a Chevy, American made, Japanese made, Korean made, it doesn't matter.

All of the cars are becoming so much more reliable than they used to be, even 20 years ago, or especially 30 or 40 years ago,

[00:12:16] Jamie: Even since high school, like you said, 20 years ago for us. I remember back around the time I got my first car, which was a hand-me-down, Kia was like a buy one, get one free special, where if you bought a Kia, you could get a Kia Rio for free.

Do you remember this? Were they doing that near you? I don't remember that deal. Hand crank windows and didn't even have air conditioning. So, I think that's like the last time I remember where there's like a brand to avoid. But even now, like Kia's are good cars that have good reviews and good reliability.

Now, like I probably still wouldn't put them in the level of Honda, Toyota, or Mazda, but you really, if you can't really go and get like a crappy car for the most part nowadays some of the computerized stuff might. Might be a little harder to maintain yourself across all the brands, but most cars, like you said, are so reliable nowadays.

[00:13:08] Spencer: Yeah. And besides reliability, the other thing that I really looked for was gas mileage. And especially nowadays with, gas prices hitting what, like six or 7 per gallon in California and Hawaii but even around the rest, what are they in Alabama at the moment?

[00:13:26] Jamie: $4.15.

[00:13:28] Spencer: Yeah. The days of cheap gas, I think, are long behind us.

And even when the conflict in the war in Ukraine winds down, I don't think we're ever going to see a dollar for a gallon of gasoline ever again. And so aiming for like at least 30 miles per gallon is the benchmark that I use. But if you can find a vehicle that's going to get you 40 miles per gallon or is a hybrid.

I know hybrids have become, again, so much more reliable in the 20 years since they were introduced, like when I was in high school and electric vehicles as well. Obviously, you've got some of the best performance vehicles in the world now, or electric vehicles. Yeah.

Whether they're Teslas or other brands. And if you can find a vehicle that meets 80% of your driving needs, or even 90%, I found that for almost. All of my driving, the vehicle that I had purchased, which was a Mazda three. Not that this is, this podcast is sponsored by Mazda or anything, but it met most of my driving needs.

And when I needed a large vehicle there was always a friend who had a pickup truck or an SUV that I needed if I needed to move a couch or you can just go to Home Depot and rent one of their large vehicles as well. A lot of, and now most of the guys who are out there buying these giant pickup trucks, they're not using them for what they're originally designed for hauling big boats.

And maybe sometimes I do that on the weekends and that's great if that's what you do, but, oh my God the cost to fill those things up with a gallon of gas or with a full tank of gas, Oh. It's just, it makes you sick sometimes to see.

[00:14:59] Jamie: Yeah. My minivan costs over like 70 bucks to fill up now.

I can almost drive a truck for that, but we have a hybrid Honda Accord. I got it last year and I got about 42 in that it's, I didn't make the change, the downsize just for gas. It would take me years to. To do it from a strictly financial perspective, we just didn't need two big cars in the minivan that fit when my wife's primary driver with the kids and stuff.

And I've really enjoyed the hybrid and it runs great and it accelerates fine. And, people talk about batteries or whatever, but like you said, I think that's the future. I actually think, either they're trying to or they recently passed that soon all new cars are going to have to be 40 plus.

I'm sure there's some caveats for pickup trucks or something like that. Yeah,

[00:15:48] Spencer: Just in general, while we're talking about car purchasing, I think this can be like one of the largest purchases a young service member makes. And it's definitely something that you want to take a little bit of time and you don't really want to mess it up.

And, thankfully you have YouTube, I'm sure there's a YouTube channel out there just dedicated to not messing up the car buying experience. And if you can. Do a little bit of research and just, prepare yourself a little bit, but with a little bit of Googling and, find going on Kelly Blue Book and the other one is a site like Edmonds and just doing some comparison shopping.

And you can quickly realize that just with a little bit of knowledge, you can arm yourself. And some of the most atrocious sales experiences I've ever had are at car dealerships. And I don't know if I've just gotten unlucky or if the stereotype is true, but man, like car dealership salespeople, if you're listening to this right now, which you're probably not, but get your, get it together guys.

Yeah. If I walk in and I tell you the exact make and model of the car I want, and I have an email from your manager that says, Yep, we'll sell it to you at this price and then you put something in front of me that adds, additional features and a warranty that I don't want and several other things.

And it's like a $26,000 price, dude. No, I emailed you specifically. So I didn't have to go through this rigmarole. And that's another thing that you can, you want to prepare yourself for if you have to deal with any kind of dealership. I guess the other thing too, you can do is go on, read some reviews ahead of time.

IKf there's a dealership out there that's got three stars and one that's got five stars, probably go with the five star one. The other thing I did, Jamie, and you might disagree with this. I'll be interested in your take was I actually financed my last car at the dealership.

And the reason I did that is and the reason that They offered me a $500 discount if I financed through them, but I read through the terms and conditions and there was no penalty for paying it off early. So while I financed with them I think it wasn't that great of a deal. I think, because sometimes I do these 0 percent financing deals which are not terrible, obviously, if you can find that, you probably can't nowadays that the interest rates are creeping up, but if you can find, if you could find a 0 percent financing deal, that's not so bad. But the deal that I was offered was 4%, I think annual interest. And, but I got $500 off the purchase price. So I took that. And then what I did was 15 days later, once all the paperwork had come in and I'd known who had the loan, I went to USAA and they were offering.

0.99%, so less than 1% interest on car loans. And so I called up USAA and said, Hey, I have this loan that I got on my Mazda, it's through Chase Bank, and I refinanced with you guys. And they were like, yep, that's exactly what we're here for . And so I refinanced it with USAA. Less than 1%, 0. 99%.

And moved the loan over there. And so I got the $500 off and finance at the dealership. But then I was able to refinance within a couple of weeks. And I think I only made one payment at the 4 percent interest, which is like. peanuts. And then the rest of the loan was with USAA.

And I only held that loan for a year before I paid it off. That was one of those arbitrage opportunities where I was, I had the cash to pay off the loan, but it was in the SDP earning 10%. And so it was one of those things where If I'm getting a guaranteed 10 percent and I'm borrowing this money at, 1%, I just, I can't like that's a 9 percent margin right there.

Ao I had the cash to cover the loan, but I left it invested in the guaranteed asset. And so I know that's. That can be painful for you to hear as a debt freedom guy, but any thoughts on that?

[00:19:44] Jamie: No, I have financed two vehicles in my adult life at the dealership and both of them stayed there.

One was at a 0 percent interest rate and one was 0.9. Both were new cars coincidentally as well. One was a Toyota Corolla and then one was a Honda pilot. And on the Corolla, it was when Katie and I were pretty newly married and we included that in the amount of debt we paid off, which I want to say was like $118, 000 total that we talked about a couple of episodes ago.

But with a 0 percent interest loan, like I don't blame it. I don't think it's a moral sin or anything to take out a 0 percent or 0.9 loan. I would encourage you if you can pay. For a car in cash, it's almost always better to do that. But I understand why people continue at a guaranteed 10 percent or something like that, or they don't want to sell stocks.

They don't necessarily have the liquid assets at the time to buy a car, but I'm a big fan of buying something with cash whenever you can, but that does bring up a good point because you can afford the monthly payment. Doesn't mean that you can afford the car. Yeah. 

How do we know that the car isn't too much for us?

Do you have any tips on that?

[00:21:01] Spencer: I mean, you'll find different guides and calculators online, and I'm sure if you walk into a car dealership, they'd say, oh yeah, as long as your payments are below 50% of your monthly income, gosh, then you're fine. Yeah, I know,

[00:21:15] Jamie: right? But walk away. Walk away.

Walk away. Ugh.

[00:21:20] Spencer: So terrible. I don't like, I don't like the whole like percentage of your income thing. I think it's really a, it's a mentality and kind of it's a gut check of if I had to do you have the cash on hand to pay for the vehicle or, and if you don't, then why not?

What, what is going on with your financial system? What is going on, have you automated your finances to the point where you have an emergency fund where you have savings and if you haven't, then now's the time to get that going. And don't keep putting it off and say, Oh, I'll worry about that after I buy the car.

Because if you don't, if you're not in a position where you can just pay cash for the car, then it's probably not the right car for you. And like my first car, when I was a lieutenant, I was making thousand dollar payments on my student loans and my USAA career star alone. And my budget for, and this is going to sound ridiculous probably to some people, but my budget was $2,000.

Like I walked into a San Antonio used car dealership and I was like, show me what you got for $2,000. And guess what? It wasn't that great. It was a 2002 Saturn L 300, which actually turned out to be an awesome car. Leather seats, heated seats, sunroof. It was fully tricked out, but for 2012 or whenever I bought it.

Yeah no, this was when I bought it. It was already 10 years old when I bought it. Yeah. Yeah. But yeah, it was a $2,000 car. And that was, cause that was the cash I had on hand. And that was the amount that I had saved. And I talked about with my wife that, Hey, this is what I'm comfortable spending.

And, obviously as my net worth grew and it was when I made captain and we had savings and we were, we had the snowball, the debt snowball going and we were crushing my student loans and my income went up and I talked to my wife and we both decided Look, we were tired of doing maintenance on a used car and we wanted to go get a new car.

And so we did. And, like I said, we had the cash set aside. And the only reason we financed it was because we were getting 10 percent guaranteed on the SDP.

[00:23:44] Jamie: Yeah. It's important to remember the vehicle that you're going to go by. It needs to meet 80 percent of your driving needs, like you talked about in the book, which is mostly just commuting to and from work.

So a lot of times we tell ourselves, Oh, I want something big that can carry boxes or couches or surfboards, paddle boards or whatever. But the actual amount of time you do that is very slim. And in fact, we've put two paddle boards on top of your Mazda three before, right? Like you can buy pads and straps that'll run underneath the, or, through the doors or whatever.

With the doors open, right? You don't want to do it with the windows open and trap yourself in with the door. You can get pads that will go on a small car and carry paddle boards and stuff. And like you said, you can rent. So think about what will meet 80 percent of your driving needs like commuting and things like that.

The security forces airmen or the MPs at the gate aren't going to judge you as a second lieutenant or ensign or an NCO. If you pull up in a used vehicle. Like I think when I was in college, I had that assumption of Oh, I'm going to be an officer. I need to have the appearance of being put together and having a nice, nicer looking car or else people won't take me seriously.

But in reality, like you said, you see a lot of field grade officers when you pull up to the unit and yeah, they, some of them have Mercedes and some of them have brand new Teslas or F-150 Raptors, but the majority of them. And senior captains, the types in my experience, have regular cars that they've had for several years.

[00:25:14] Spencer: Yeah, that was definitely something I experienced as well, the societal pressure and I think I even had, guys in my ROTC unit who, we're talking about oh, you, like you're, you're an officer, you have to drive a nice car. It's just bullshit. It's just, it's, you don't have to, like you, you don't have to fake news to drive a nice car.

I talk about in the book, like maybe your friends will gently mock you if you drive a slightly older car with some light cosmetic damage. But if your priority is financial freedom and financial independence, then dude, just it's water off a duck's back.

Like just laugh it off and be like, yep. I hope you're enjoying that $60,000 Ford F-150 that you got a great deal on and you'll be paying off for the next seven years. If that, and if that's what they want, then great. I do talk mockingly of pickup truck drivers, but only because they're such an easy target.

And I'm sure one day it'll come back around and fight me because I'll be driving a pickup truck. But, again, like if that is your goal, if that is like you make money so that part of the reason that you go to work is so that you can drive a nice truck. Awesome. Go for it. But if you are serious about financial independence and about building a rich life and becoming wealthy, then you knowman expensive vehicle, and I think on most military bases, it's the pickup trucks that are usually the most expensive. If you purchase one, it could handicap your journey to FI. And in the millionaire next door they talked, which is a fantastic book and I think they did an updated one recently, but I'm talking about the 1980s one or the 1990s one and the type of cars that most of the millionaires they profiled drove were Honda civics.

And Toyota Camry is much more represented than the Mercedes Benz or the Lexus Lexi Lexuses. And I think, and actually I think nowadays the best selling car in America is the F-150. So they probably have to update that. That's fine, right? If you're a millionaire, drive your F-150. But if you're a young airman or soldier or a new lieutenant and. Again if cars are what gets you going and you want to drive the big truck, go for it, man. But if that's not important to you, and if you're listening to this podcast, financial freedom, financial independence is probably what you're going for.

Then just recognize that, a $30,000 car. It's a depreciating asset despite what the 2022 market has done, but in general, in most circumstances a car is a depreciating asset where it's going to lose value every year instead of gaining value. So if you invest that $30,000 cash into, let's say, Vanguard total stock market index fund, VTI, and you get a 7 percent average annual return for the next 40 years.

Well, $30,000 would grow to $449,000. There's definitely value. It's not just a $30,000 car. It's, it's right. It's taking almost half a million dollars away from your future self. And if you think about it like that, then it puts it in perspective. Now, that being said, you probably still need a vehicle, right?

So, as much as we like to berate people for overspending on a vehicle, like a day to day, you're probably, if you're in the military, you probably do need a vehicle because military bases are huge. And a lot of times you don't live on base. And so in order to, and that's just the matter, that's just the fact in America, like we just don't have a public transport system.

So if you're living on or near most military bases, you're going to need some kind of vehicle.

[00:29:10] Jamie: Yeah. I think the best way to handle if you have friends or coworkers mocking your Or used car is just wipe your tears away with 100 bills because you're going to be saving a lot more money than they will probably, but um, you mentioned your decisions earlier about new verse used in general, most people say that a used car is financially a newer used car is financially a better decision than a brand new car because of the depreciation factor and how so much money of the car's value drops are off basically the second you pull off the lot, it makes it a used car.

So again, the 2022 car market is abnormal, but keep that in mind too, is. You can look at a new car, but just know the value is going to drop almost immediately. So if you can get a car that's maybe three years old, five years old, somewhere in that range, it's in my opinion, a sweet spot of someone else already took the depreciation hit for you.

Maybe they're millionaires and they don't care. And then you can just ride it and keep it. Sometimes we tell ourselves that I'm going to get this brand new car. I'm going to spend extra on it and get all the features I want, and then I'm going to keep it forever. Then next thing, your family's growing or you're moving to Alaska.

Now you need something with an engine warmer or four wheel drive for the Northeast or whatever. So don't believe the lie that sometimes we like to tell ourselves that I'm going to splurge on this car and then keep it forever and use that as an excuse to spend too much.

[00:30:37] Spencer: And that vein, Jamie, like what about family cars?

So I don't have kids, but you've got a couple of kids. I know a lot of families, especially if they're having their first kid, they might think, Oh, time to buy the Volvo. Because we got to have a safe car. Is that legit? Or is that another one of those lies that we tell ourselves?

[00:30:55] Jamie: I think it's, there's definitely cultural pressure. That tells us that marketing tells us that a lot. And to be honest, that is one of the reasons that we got the Honda Pilot I mentioned earlier when we were expecting our second kid. At the time we had a compact SUV, a Jeep Patriot and a Toyota Corolla.

And you can fit one kid in, in smaller cars pretty well. As Americans after one or one or two kids, it starts to become tight. But think about it like when you go to Japan or when you go to Germany, how many F-150s and minivans do you see over there? Hardly any, right? So there is a way to physically fit your family in a smaller vehicle.

It just does a little bit outside of the norms in America. So you don't have to get a minivan or a large SUV. What I see most people going is like a Tahoe or a Suburban because they're too cool for a minivan. And then they end up having four or five kids and they're like, okay, we should've gotten the minivan.

They're sweet. By the way, if you are going to upsize because your family's growing, just go ahead and go all in on the minivan. The sliding doors are great. It's easy for the kids to get in and out of the car seats. So there's some of it there, but you don't want to like it. You can get a three or five year old used car and it still be plenty safe for your spouse and your kids to drive around.

And it does not need to be a brand new car that costs $50,000 or more just in the name of safety for your growing family.

[00:32:20] Spencer: Yeah. Another consideration that military service members have to take into their cross check is moving OCONUS, especially to places like the UK or Japan where they're driving on the other side of the road.

And you're not going to be able to bring your vehicle with you from the States or, from Germany, if that's where you're coming from. And, that's not something people think about when they're buying that, Ford Raptor, but if they do get an overseas assignment.

And all, and they've got this asset that they've been making payments on. And now granted in 2022, it's probably worth more than you pay for it. So well done you, but in most normal markets, it's going to depreciate. And then you have your face with a choice. Do I put it into storage and keep making payments on it?

Or do I sell it and take a little bit of a little bit of a loss. And so I think that's another, we're always moving in the military. We're always at the whims of Uncle Sam. And so you need to take that into consideration that, that car that you just bought, it might be perfect for your situation right now.

But in a year or two, you might get orders to go to Japan and you're not gonna be able to bring that, that Ford F-150 with you or that Honda Pilot for that matter. And so now you have to make a choice. Do I sell it? Or do I put it into storage so it's there when I get back? Or do I give it to a family member?

It's just one more thing to bring into your calculus that a lot of people in America don't have to think about, but military service members do have to.

[00:33:55] Jamie: Yeah, that's a great point. The car that's perfect for you right now is not the same car that's going to be good for you in even probably five years, especially if you're just joining the military.

So keep that in mind. Is it a used car that you get? Maybe you're looking at the five or $10,000 price range for your thinking your first car when you join the military or second or third car doesn't have to be a car you keep forever. You don't have to be an E-9 or an O-7 O-6 or O-5 driving around the same car that you're buying today.

You can upgrade, you can save money and upgrade. And I think a lot of times we, like I mentioned earlier, we picture this car as being the one that we're going to keep forever. But in reality, A new feature comes out like Apple CarPlay and all your friends have Apple CarPlay and you're like, Oh, I want to upgrade, so I can plug in and get my Google Maps on Android auto or whatever.

So stuff's gonna, stuff's going to come out and the marketing is going to affect you and you're going to want to. a newer car sooner than you expect right now as you're looking at a car. Another thing to keep in mind. 

Another military unique thing about car buying we haven't mentioned yet is to look at what's called the lemon lot on base.

Every base has a used car lot. It's run by the MWR program and people will put their cars there and usually in the window they'll have, description of the car and how many miles it has and a point of contact and stuff like that. And so you can drive. Pass the lemon lot on your post or on your base and just drive through the parking lot and see what cars are there.

So one of the nice things about a military base or post is there's always people coming and going. So especially if you're overseas and you're looking for a beater in Japan, or you're in Hawaii and you need an island beater, or you're at your first base out of tech school and you're looking for a car, definitely check out the lemon lot because there'll be used cars there usually owned by military people.

They have to have base access to put it there, obviously or veterans. So maybe a little more trustworthy or at least we like to think. And so you can get good leads on cars there. The other tip I wanted to mention is one, one other thing to consider is expanding your search area when you're looking for a car.

So I actually bought both of my last cars this way, but the minivan that we had. That we have now as a Honda Odyssey, and we bought that in Florida, even though we were in Hawaii when we bought it, and what we did is I was able to save about 2,700 for comparable minivans in the area where my parents were or in the area where we were PCSing to by buying it in Florida.

And I'm not talking about sales tax or anything. That's just the cost of the car. And I spent $750 paying someone to ship it from the dealer to my parents house, where then we flew in from Hawaii and picked it up there. So by expanding my search criteria on auto trader, I think it was the website I found nationwide instead of, within 200 miles of the zip code or whatever.

I saved 2, 000 on the car purchase. And we know Spencer that one of the tricks is that we want to do things that move the needle and so little things like not buying a latte or whatever, sure it can add up, but you, if you cut out too much of little stuff and then ignore big purchases like a house or a car, those are really money saving times where you can really move the needle on your financial independence journey by being smart with these big purchases.

[00:37:25] Spencer: Yeah. That's a good point, if it is a 10, 20, 30,000 purchase just a little 5%, 10 percent savings here and there, getting a fee taken off, not paying sales tax that can make a big difference in your bottom line. And especially if you're doing this early in your military career.

Then you can really, you can invest the difference or not take a loan out that you don't need. The other thing I just wanted to mention before we wrap up here is the Psychology of Money, a great book by Morgan Housel. He has this concept in there that we can't actually see each other's net worth or wealth.

So when you see someone driving a Ferrari. Or living in an expensive apartment downtown, we don't actually know that person's wealthy. All that we know is that they're actually a little bit less wealthy because they spent money on that object. So wealth is something that you can't see.

And the things that you can see are actually expenses. And, he has a quote, like someone driving a hundred thousand dollar car might be wealthy, but the only data point you have about their wealth is that they actually have a hundred thousand dollars less than they did before they bought the car.

Or they have $100,000 more in debt, which also decreases their net worth by the same amount. So that's all you know about them. And I think that's, to me, when I read that kind of gets back to nobody actually cares about the car you drive, as long as it's reasonably safe, the seatbelts work it can pass, a basic, state inspection.

And it's not completely falling apart, nobody cares. And so that's and I think once you realize that and that's the secret that, that lieutenant colonel, that O-5 pulling into the parking lot, driving the Honda civic, he or she is confident enough that they produce good work at work or they're financially secure enough that they can drive the Honda civic and they don't care. It's just not important to them. And, but the same thing might go for the person driving the Maserati, right? Like they could be in a good financial position and, but guess what? They actually enjoy driving a Maserati.

And you can't just from external appearances, if the two lieutenant colonels, the Maserati driver and the Honda civic park next to each other, you can't assume, Oh, the Maserati guy is doing better than the Honda civic guy. It might be the other way around. It might be equal, but at the end of the day, guess what?

Nobody actually cares unless you really like, yeah, exactly. And if they do then who cares? Like that's their problem. So you don't have to worry about that. And Morgan Housel talks about that in the book about how social comparison is the problem where you're always, people are always comparing themselves and like where they fall into the ladder.

But if you just, if you don't want to play that game, then you can just opt out. And you can play a different game and financial independence. And he also, he has this line about how, like the ceiling of social comparison is so high that virtually no one will ever hit it. And you see it like with the billionaires. As soon as Jeff Bezos builds a 500 foot super yacht, some Saudi billionaire orders a 520 foot super yacht, right?

Like everybody needs to be number one and one up each other. But it's just, it's a fool's game. You can't, you can never win.

[00:40:44] Jamie: Keeping up with the Joneses is a constantly moving target. Basically. Yeah. Yeah. 

Thanks again for joining us today on this episode about buying a car, whether it's your first car you purchased after basic training or your 10th, these concepts we believe will help you stay well on your way to achieving financial independence while in the military as a review. 

Today's main ideas were number one, don't buy more cars than you need. 

Number two, buy the car that's right for you, not the one you think you should drive based on society, marketing your friends, or any other pressure from outside.

And number three, used cars are perfectly fine, but there may be times where new cars can be better in the long term as well. If you are enjoying the podcast, we would appreciate a five star review on Apple podcast or Spotify. We appreciate all the reviews we've received so far. Thanks for all the listens.

And we appreciate you guys a lot.

[00:41:35] Spencer: Subscribe to the podcast. So you don't miss future episodes. You can just hit the little plus button or the alarm bell to get notifications on whatever app you use. And if you have any questions or feedback, you can message us on Instagram. Like Anthony did, who was the motivation for this episode. So thanks a lot, Anthony, for messaging us on Instagram. It's @militarymoneymanual, or if you're more old school, you can find us on. The email info@militarymoneymanual.com. Thanks again for listening and we'll see you in the next episode of the military money manual podcast.