When Shopping for a Car, Never Negotiate on the Monthly Payment

If you’re planning to finance a new or used car, then it’s easy to get caught up on the monthly payment number when the salesperson presents you the price quote. And why not? That’s the amount of money that will be coming out of your account every month, so isn’t it important? It is, but you shouldn’t focus on only the monthly payment when negotiating a car deal.

Don’t negotiate on the monthly payment

Fresh Auto car dealership
An aerial view of cars at the Fresh Auto car dealership. According to the Autostat analytical agency, in the first quarter of 2021 Russian citizens bought 56,000 new foreign-made cars, which is 1% more than in the first quarter of 2020. | (Valery SharifulinTASS via Getty Images)

Have you ever thought to yourself, or even worse, asked a car salesperson, “Can I buy this car for $500 a month?” If so, that’s the wrong question to be asking. The amount that you’re spending on the entire car is more than just the monthly payment that you pay every month. For example, you can get a $500/month payment for 36 months on a used car that costs $17,165, but you can also pay that same amount on a car that costs $27,751. However, the latter car will take 60 months to pay off.

The point is that if you shop for a car based on the monthly payment that you can afford, that will give the dealer free reign over the total cost of the car. In some cases, when dealers find out that you’re a “payment buyer,” they will then tack on extra products or services onto the car’s total price and hide it in the monthly payment. Credit Karma notes that dealers will even stretch out the payments in order to meet your monthly payment goal, which means more interest accrued on the loan and more time that you have to pay it.

After all, if you’re mainly consumed with spending $500 a month, then chances are that you won’t even notice how much the overall cost of the car is.

Focus on the out-the-door price of the car instead

Instead of only looking at the car’s monthly payment when you’re presented with the sales numbers, look at the out-the-door price. This price is the selling price of the car plus any additional taxes, fees, and registration costs associated with it. In short, it is the “total” price that you pay for the car. By negotiating this number instead of the monthly payment, you will save money in the long run.

For example, that used car that costs $17,165 will cost you $500/month for 36 months and you will pay $835 in interest. However, if you negotiated the price of the car down, your monthly payment will be $471/month instead and you’ll pay $787 in interest. Not only are you saving $29 every month, but you would also be saving $48 in interest over the course of the loan (with a 3.11% APR). As you can imagine, these numbers increase –  including the amount of money that you can save – the more the car costs.

Negotiate your trade-in separately

Two ladies learn about the Audi TT from a car salesperson
Ali Haydar Berkpinar, a Turkish salesman giving advice at the Audi TT. | (Yavuz Arslan/ullstein bild via Getty Images)

Another way that you can get more money out of the car is by negotiating your trade-in. If you plan to trade in your old car when you purchase a new (or used) one, then negotiate that appraisal amount separately. You want to get as much out of your trade-in as possible. Many dealers will make it look like you’re getting a good deal by offering you less on your trade and taking more money off the selling price of the new car. However, that ultimately balances out and you won’t really be saving any money in the end.

By negotiating your trade-in amount separately, you’ll be able to ensure that you’re getting the most money possible for it. Then you can negotiate on the price of the new car and save more money that way. In the end, while having to negotiate on the price of the car might seem more daunting than paying attention to the monthly payment, it can save you hundreds – if not thousands – of dollars on your next car purchase.

RELATED: Why Have Some Dealerships Stopped Negotiating on Price?