Do Not Negotiate the Payment When Buying a Vehicle

One of the most costly mistakes that people make when purchasing a new vehicle is to negotiate on the amount of the loan payment. There is a reason that the first question asked by many car dealerships is what range you are looking at for a monthly payment, unfortunately that reason is not in your best interest.

The problem with negotiating on the monthly payment is that the car dealer can basically construct the loan in such as fashion that you pay far too much for the vehicle even though you stay within your target range for a monthly payment. For instance, if you tell the dealership that you are looking to keep your payment under $400 per month, they might add an additional year to the term of the loan in order to charge more for the vehicle but still keep you within your budget.

The “out the door” price of the vehicle should be the number that you are interested in the most, as that is the number that will ultimately determine your payment. However, you still need to stay alert so that the dealer does not try to compensate for a lower sales price by increasing the costs somewhere else in the deal such as a lower trade-in price, extended warranties and options, etc.

Ideally, you will have arranged for financing (if needed) before you even set foot into the dealership to begin negotiating on a new vehicle. Once you have negotiated that price with the car dealer, then you can offer them the opportunity to beat your prearranged financing. Since you planned ahead and came to the dealership prepared, you might end up with even more attractive loan terms when they try to keep the financing in-house.

Take the time to do your homework before beginning the negotiations with a car dealer and you will likely save yourself a considerable amount of money. If you have other car buying tips or have any questions, please share them below.