Buy A Car Payment?
Ever bought a car payment? I hate to admit it but I have. What exactly do I mean by buying a car payment? I mean going to shop for a car with a monthly payment in mind. What’s so bad about buying a car payment?
When you start the great car search most people have in mind how much money they can afford per month to pay for a car. Don’t get me wrong your budget is very important, know how much you can afford per month, but just don’t let the dealer know this information. Why? Because it’s their job to get the most money from you as possible and most of them will try every trick in the book to confuse you. For example, you tell a dealer you can afford a car payment of around $350 per month. It’s very easy for a dealer to try to get you to pay $20,000 for a car that is price at $17,500, especially if you have a trade in, how? Creative financing, it’s the difference of financing $20,000 over 6 years and financing $17,500 over 5 years. Both payments are about the same, about $350 per month (assuming 8% interest).
When you go to buy a car with a trade in know how much your car is worth before you go. There are a few different websites you can research to find out a general idea of what they will offer. KBB, Edmmounds, and NADA are all great resources. The prices of all these sites can vary but find an average of the three sites and then subtract about $2,000 – $2,500Â from this value (This is what they will offer you the first time they show you a payment). Here is an example:
You owe $16,000 on a car and you find the average value of your car is $18,500. You’re looking at buying a car that has a sticker price of $17,500. The dealer is probably going to offer you $16,000 for your car giving you $0 equity. They will show you the full sticker price of $18,000 from the new car so you would finance $18,000. They tell you “I think we’ve got a deal worked out you will like, we’ll keep you at around $350 per month for 52 months. DON’T TAKE THE OFFER!
You can always get the dealer to come down some on the sticker price of their car and never take their first offer on what they are going to give you for your car. The market value of your trade-in probably isn’t what the three websites display because the dealer could get the same car at a wholesale auction for much less so they probably won’t come down to the website average but they will come down a bit. There are many factors to assume when trading a car but a great counter offer for this situation would be to not talk about payments. Tell them you want $17,000 for your car and you are willing to give them $17,000 for their car. This would leave you with $1,500 equity in your car for a total amount owed of $15,500. $15,500 over 48 months at 8% is about $378 per month.
If you are going to get a deal on a car you will also have to threaten to walk away if you don’t get what you want and then follow through with your threat. There are hundreds of cars in your area that match what you are looking for so another deal is around the corner. Don’t throw away your hard earned money to greedy car dealerships. Work hard for a great deal and you will be much happier with your new purchase!