Don’t Be a Payment Buyer When Buying a Car
Steve Hague, author, speaker, and Certified Purchasing Manager
Editor’s note: Steve Hague is a frequent contributor to this blog.
One of the first things a car dealer will ask you when you enter their lot is, “How much do you want to spend per month?” Most people will give him some type of answer such as, “I’m looking to spend about $350 per month.” Your answer should always be something like this: “I want to get the best deal on the car I’ve chosen so let’s focus on the actual price.”
Why wouldn’t you tell him what you’re willing to spend? Because it’s almost a guarantee that he’ll make the deal work around the monthly dollar amount you give him. How can you guarantee that he can do that you ask? The car dealer shell game.
The shell game is where you take a pea and hide it under one of three shells or cups and watch as the person running the game transfers the pea from under one cup and then another in the blink of an eye. A similar game can and does get played at car dealerships except your money is the pea and there are several kinds of “shells” the dealer can transfer your money back and forth with.
The dealer actually has multiple shells to work with and doesn’t need to move at blinding speed. Here are the options the dealer has for moving money from one place to another to make a budgeted number work:
1. Down Payment: By increasing your initial down payment, the dealer can make your monthly car payment smaller and within your budgeted comfort zone that you told him.
2. Loan Term: By increasing the length of the loan in months, the dealer can make the monthly payments smaller while actually increasing the overall amount of money you pay through interest.
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3. Trade-In Value: By giving you much less value on your trade, the car dealer can lower the payment on the new vehicle.
4. Lease: By having you lease the car, the dealer can reduce the amount of money you pay each month to fit your budget. Unfortunately at lease end you’ll turn the car in and have nothing.
5. Any Combination of the Above: You as the car buyer need to know exactly how much you can afford to pay whether it be the total costs of the car or monthly payments. But don’t ever tell the dealer this information or the shell game will begin and it’s your money that’s at stake.