The time has come! You’ve saved for your down-payment. You’ve triple-checked your finances and know your available monthly budget. You even found the perfect car online. Excitement is in the air, along with that new-car smell. So, how do you get the best deal on a car? Focus on total price, not monthly payments.

Salespeople at dealerships are listening for that one vital piece of information…your DESIRED MONTHLY PAYMENT. Why? Because with a little creative math, making just about any vehicle fit into that budget is possible.

The Payment Trap

The number one mistake when buying a vehicle is letting the dealership know what you want your monthly payment to be. If you pay attention, that’s typically the first thing they ask.

SALESMAN: “So, what do you want your monthly payment to be?”

YOU SHOULD ANSWER: “It’s flexible. I’m more focused on the total price of the vehicle.”

If you divulge what your monthly budget is, almost any finance expert can make that monthly payment happen. They do it by extending the term, or length of the loan, taking away features, or reducing your warranty coverage.

Let’s use the following example to show how this is possible.

Assume the car you want is $30,000. Your approved car loan rate is 3% APR.

60 Months  $ 539.06  $ 2,343.64
72 Months  $ 455.81  $ 2,818.34
84 Months  $ 396.40  $ 3,297.52

Notice how the monthly payment goes down with the longer term, but the total interest you pay increases. The difference in this example between a 60 month and 84 month car payment is $142.66. While that is a big monthly savings, you’ll notice you also pay an extra $953.88 in interest over those extra 24 months.

It’s very easy to see how dealerships are able to use ‘funny numbers’ to get just about any car to fit your monthly payment. And, because you’re excited about buying a new car, if the payment fits your monthly budget, you’re happy. It’s not until later that you realize they just sold you a vehicle you can’t really afford.

We understand getting that fancy new car is exciting, but you don’t want to overspend and take out a 7-year car loan!

Make Total Price the Focus

One of the easiest and most effective ways to prevent falling into the payment trap is to get a preapproval before you go car shopping. Getting preapproved means you applied for your car loan at your financial institution before finding your vehicle. They’ll give you a maximum TOTAL amount you can spend. Then, you can take that number and go car shopping.  Then, you know any car over that TOTAL PRICE is out of budget. Only negotiate the TOTAL PRICE of the car, including taxes and fees (people forget about those pesky charges.) 

At Money FCU, we can calculate what you can afford based on your desired monthly payment, but there is no pressure with us. We won’t upsell you on anything because your financial well-being is the most important part of our relationship.

The preapproved amount is the maximum you’re able to borrow and prevents a dealership from putting you into a vehicle you cannot truly afford. Instead of focusing on monthly payments, the focus becomes the total vehicle price; thus, eliminating the payment trap. That’s how you get the best deal on a car.

We’re Here to Help!

When you’re ready to begin looking for your next vehicle, call, chat, or  text us M-F, 9am-4pm, (315) 671-4000. We’re ready to help you get pre-approved and lock in a great, low rate.

Think About it This Way:

Let’s say you were shopping for a new laptop and doing research online. Wouldn’t you shop around for the best TOTAL price? You’re not looking to see how much it will cost you monthly. You just want the best deal. Remember that when you’re buying a car. Dealers try to distract you with the pretty car and how affordable it is, but you need to ask about the fine print, which is the total price of the car.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.