There is no shortage of advice on negotiating the purchase of a car. Although the research potential of the Internet empowers you to enter negotiations armed with a lot of information, you remain at a disadvantage if the process intimidates you. It is tempting to walk up to a car salesman, cut to the chase and state the monthly payment you prefer. That approach is listed under the “what not to say” advice offered by experts who understand the car-buying experience. However, because it seems rational to negotiate from the monthly payment vantage, it helps to understand why experts warn against the approach.
Monthly Payment vs. Purchase Price
Negotiating the purchase prices is the safest choice, says John Nielson in a CNN article. Nielson, a director with AAA, explains that there are a lot of variables that affect monthly payments. The dealer earns more money when your contract is based on monthly payments. Once you are focused on a monthly payment amount, the process moves forward without discussion of contract details, such as the interest rate, the length of the loan and the amount you will spend if you keep the car through the end of the loan. You learn those facts after you sign on the dotted line.
Behind the Monthly Payment
Your saleswoman might start off with the question, “How much do you want to pay monthly?” ConsumerReports.org says don’t don't answer that question. The saleswoman will gladly work hard at wrangling those contract variables to get you a desired monthly payment. She can juggle the price of the car, the value of your trade-in and the financing to arrive at a monthly payment amount, perhaps extending the contract to reach a lower payment. In the end, you will pay more for the car than it is worth and also pay much more in interest.
ConsumerReports.org recommends focusing on one aspect of the car sale at a time. Negotiations should begin after the dealer makes an offer, without knowledge of your target price, and you settle on a price for the car. After price is determined, it is time to talk financing. Advertised interest rates are usually for the shortest contract length, so getting the monthly payment you want will probably require a longer contract. Take time to recalculate the loan for each monthly payment amount you consider. Negotiate first on the car's price and financing.
Just because you refrain from talking about monthly payments doesn’t mean you aren’t thinking about them. The challenge is to take your time and get the information you need to make a good decision about the car you decide to purchase. Monthly payments and dealer incentives aside, you need to know how the car is rated in terms of mileage, reliability and safety. Check prices in your area. Consumer reviews also help with your decision. Don’t let budget concerns get in the way of making sure you get a good car for your money.
Gail Sessoms, a grant writer and nonprofit consultant, writes about nonprofit, small business and personal finance issues. She volunteers as a court-appointed child advocate, has a background in social services and writes about issues important to families. Sessoms holds a Bachelor of Arts degree in liberal studies.