Wait … What Did I Just Sign?

Sometimes making a major purchase can be a lot of fun, and sometimes it’s just a necessity — think booking a family cruise versus buying a washing machine. Some purchases, like buying a car or a house, are a combination of the two. Regardless of the reason or element of fun in your purchase, your choices will have important short- and long-term effects on your finances. It’s worth spending extra time planning, comparing options, and researching the products and suppliers you’re considering to make sure you’re making the best choice for you.

Who is on your side?

There are several parties involved in a major purchase, like manufacturers, sales people and lenders who are all highly motivated to help you close the deal. They definitely want to help you make a purchase, but remember their goals are probably not the same as yours and may not be in your best interest.

Predatory lenders often see the military and their families as prime targets. These companies will use high-pressure sales techniques along with confusing and deceptive practices to get you to commit to a loan or purchase. Their financial products can even be designed with the intent of trapping you in a cycle of high-interest debt. Payday lenders, buy here pay here, and title loans are just a few of the more obvious forms, but there are others that you need to keep an eye on.

Before choosing a specific product or lender, consider all of your options and seek advice. Talk to friends who have experience, financial counselors available through your installation’s Family Center or through Military OneSource, and do as much online research as you can. Check references with the Better Business Bureau and access Consumer Reports for unbiased product quality information.

Tip: Do not use the link to BBB or Consumer Reports on a provider’s website. Go directly to the BBB or Consumer Reports websites, and search for the company or product.

If you’re doing business locally, installations may maintain a blacklist of specific companies/services in the area that have been proven to rip off military members. If a business is on the blacklist, military members are prohibited from working with or purchasing from them. Check your installation’s list before narrowing down your options. Lists are often maintained by the Command Inspector’s Office or the Legal Office.

If you suspect a business isn’t following fair business practices, check with your installation’s legal office. Service members and their families have extra protections from predatory lending under the Military Lending Act (MLA). For a detailed description of your rights visit the Bureau of Consumer Financial Protection’s website.

What about hidden expenses?

When making a major purchase, make sure you know about any additional expenses involved. Often, the purchase price is just the beginning. Learn about which add-ons are required and which ones you may be able to forego. Research operating costs, maintenance costs and deprecation rates before making your final decision.

What are your alternatives?

After researching the product, the business and the potential lender, use all of this information to formulate a plan. Take a look at what effects the purchase will have on your other financial obligations and goals, and determine if it’s the right course of action for you. At this point, you may also want to consider some alternative plans, like substituting an older or less expensive model of the same product.

Advertisers and marketing companies spend millions of dollars each year to encourage you to spend your money. Pause when considering a major purchase, and make sure you’re approaching the process with an analytical mindset and not an emotional one. This will help you make a better, more calculated decision. Without analysis, research and planning, you will buy based on your emotions and lose control of your finances.

For example, as of Dec. 2018, the average price of a new 2019 popular SUV is about $26,000. The same model, but 2017 and used, is about $18,000. Consider whether a simple substitution like this could help you save in the end.

Remember that any amount you save on your purchase and your loan can be applied to an emergency fund or savings, which can really add up over time. To help compare options, you can find several great loan calculators at MyMoney.gov.

There are a number of ways to get what you want or need and reduce the amount that you spend. Consider all of your purchase and financing options, and make sure to research the total cost of your purchase before making a final decision. Choose to work with a reputable company, and seek the guidance of a financial professional to ensure your major purchase is a good one, whether you’re shelling out for fun or out of necessity.