Negotiation tip: Haggle on price, not payment

Dollar bill shaped like a car with quarters for wheels

If you’ve ever bought a car from a dealer, you know the drill.

The salesman will almost certainly begin talking about how much the monthly payment is and not what the price of the vehicle is.

It makes sense because, when you look at a vehicle that costs tens of thousands of dollars, you can begin to get sticker shock. You might compare that number to your salary or your retirement nest egg and begin to second-guess your decision.

Salespeople know this, so they make things look affordable by talking about monthly payment.

Here’s the problem: This is the oldest trick in the book to get you to spend more than you want or should.

When you’re financing a car, there are a number of factors in play, only one of which is the vehicle price.
The salesman can dramatically alter the monthly payment without lowering the price of the car.

Tweaking the interest rate, trade-in value, and most importantly, the length of the loan, and the monthly payment can change by hundreds of dollars, making even the most expensive car look affordable.

In the end, it’s usually putting you into a longer term loan that makes the payment look affordable, but all you’re doing is paying even more for the car by way of extra interest and making it likely you’ll be upside down on the loan if you try to sell before it’s paid off.

Don’t fall into the monthly payment trap. Before you even begin shopping for a car, have a budget in mind and know what the vehicles you’re interested in are selling for. Then use our auto loan calculator to get an idea what your monthly payment will be. And don't forget our five steps to get the best deal on your new ride.

Use this as a baseline when shopping and don't fall prey to a longer term loan just to bring the payment down. Instead, haggle on the actual price of the vehicle. If the financing terms don’t change, then the lower cost of the car will naturally make the monthly payment go down.