Why should I never negotiate a cars price according to the monthly payment?
Because that is exactly how the sales representative likes to play his game! You know, based on your budget, that you can only afford $150 a month. Like a sheep, you tell the sales rep this fact. He goes back to the “office” or wherever, and comes back and says, “If I can get you this car at $175 a month, will you buy it today?” You think, why not? It’s only an extra 25 bucks, so you say “yes”. He comes back and says you’ve closed the deal. An extra $25 dollars a month equals $1500.00 on a 60 month loan. In one smooth move, he got you to raise your bid by $1500…and his commission. Instead, first sit down at home and work out what you can afford each month. Multiply this by sixty (or whatever number of months you wish to spread out the payments). This should be the final price of the car you settle on purchasing (plus your down payment, if you have one). Tell that sales rep you want to settle on a price before you talk financing. If he says, “How much were you looking to pay each mont
Monthly payments can be deceptive – what are the hidden costs, what is the interest rate, are there any early pay-out fees, what’s covered, what’s not? My advice, from my time in the car industry: look into finance yourself, in your own time. If you must, work out how much you can afford a month – INCLUDING maintenance, insurance and running costs. Deduct these running expenses and you will come up with how much you can afford in repayments. Now, research different finance companies and find out which one gives you the greatest principal (amount of cash) for that repayment. Try to get a low interest rate, but at the same time avoid anything with nasty fees. Also, it may be a benefit down the track to find one with no early payout fees. Look for Gap insurance (covers the losses involved in replacing a car), and some banks or credit unions even offer things like nullifying the loan if you are killed (sounds macabre, but looks after your family). Get the best deal for finance BEFORE you e
The reason you hear that advice is that negotiating a price is a one topic conversation: “How much?” It’s very easy to keep track of where you stand. Once you’ve negotiated a car’s price, the monthly payments will be determined by a number of factors, but the amount you’re borrowing is only determined by the price, plus tax and license, minus your down payment. Payments however, are not just determined by the amount you’re borrowing; but the term of the loan and the interest rate you’re getting. When negotiating with a dealer, they prefer to negotiate with payments because #1, as I mentioned, the variables involved in determining a payment and keeping the actual price out of the conversation gives him an advantage regarding holding a higher profit. Every $20 per month you give represents approximately $1000 when buying a car on a 60 month purchase (if your credit is good… that’s about a 7% interest rate). It’s easier to say yes to $20 than to $1,000; and if they have some 2.9% factor
