When it comes to buying a car, U.S. military members have an advantage. Many lenders offer special military auto loans that work just like regular auto loans, but with better loan terms.   

If you’re serving in the military or retired from service, there is a good chance you can qualify for a military car loan with a competitive rate.  

6 benefits of military car loans 

Military car loans are better than conventional car loans in several ways: 

  1. Easier to get approved. Military car loans are generally available even to service members with credit scores lower than the cutoff for regular car loans. The approval process is usually faster as well. 
  2. Lower interest rates. Lenders usually offer reduced interest rates or military car loans, such as a discount of 0.25 percent to 0.50 percent off their standard rates. A lower rate could save you a great deal of money in interest payments over the length of the loan. 
  3. No prepayment penalty. If you pay off a military car loan early your lender will not charge a prepayment penalty, such as the one that can come with regular car loans. 
  4. Lower down payment. You can pay less money up front for military auto loans, with some programs offering no-money-down loans. That makes it easier to save up enough for a purchase, though paying less upfront means you’ll have to pay more interest over the long run. 
  5. Longer repayment period. Regular auto loans tend to have 36-, 48- or 60-month terms, with shorter term loans offering lower interest rates. Military auto loans offer even longer options for repayment periods. 
  6. Legal protections: The Servicemembers Civil Relief Act (SCRA) provides active-duty service members protections for installment contracts, like auto loans. These protections include prohibiting creditors from repossessing a vehicle for breach of contract without a court order. The SCRA also limits the interest rates charged on auto loans that were opened prior to joining the service.  

Drawbacks of military car loans 

The same risks that apply to all auto loans apply to military auto loans — most importantly, the risk that you might not be able to make your installment payments. Defaulting on your loan could hurt your credit score and make it more difficult for you to borrow money in the future.  

The ease with which military members can get a car loan makes it even more important to be cautious and think through the purchase. Your loan may be less costly because of your military status, but the other costs of owning a car — maintenance, insurance, parking fees and fuel — likely won’t be cheaper.  

How to qualify for a military car loan 

Each lender has its own set of qualification criteria. However, you’ll generally need the following to be eligible for a military car loan:   

  • Proof of your military status, such as your active-duty military identification card or military or discharge papers if you are a retired service member. 
  • Your contact information, including a local address for the location where you are currently stationed. 
  • Contact information for family members who can handle matters related to your loan if you are deployed overseas. 

The bottom line 

Military car loans come with a variety of benefits, including lower interest rates, lower down payment requirements and federal protections. But remember, even with a military loan, the same risks of borrowing apply including that you may not be able to make the payments.  

For this reason, you should still shop around when you’re ready to apply for an auto loan to ensure you get the best deal for your needs. 

Consider checking your rates with military credit unions, like Navy Federal and USAA, as they offer auto loans with competitive terms to current and retired members of the armed forces.