Should you tell car salesman your monthly payment?

Even though the monthly payment is the most important factor for many buyers, you should never discuss this with the dealer during negotiations. The first step is to set the price. Dealers often include monthly payments in negotiations to confuse the buyer about what they are actually paying for the car. Negotiating purchase prices is the safest option, says John Nielson in a CNN article.

Nielson, director of AAA, explains that there are many variables that affect monthly payments. The dealer makes more money when their contract is based on monthly payments. Once you focus on a monthly payment amount, the process moves forward without analyzing the details of the contract, such as the interest rate, the length of the loan, and the amount you will spend if you keep the car until the end of the loan. You learn that data after signing on the dotted line.

Don't let the dealer take out a credit report for you. Once the dealer knows your credit score, it can affect negotiations for the car you're interested in buying. It's best to tell the seller that all they care about is getting the best price for the vehicle. This is the biggest mistake a buyer can make.

Often, the dealership focuses on a monthly payment scheme, insisting they're getting a great deal, but at the end of the day they won't really know what they paid, Gentile advises. If you plan to change your old car when you buy a new (or used) car, negotiate that appraisal amount separately. Car dealers expect you to fall in love with a vehicle, the logic being that if they know you love the car, you could overrate it in your head. Whether the salesperson shows you a Ferrari or a Chevy, their answer should always be to point out the car's problems and faults.

The other pitfall is that if the dealer knows they owe you a certain amount for the trade-in, it might be more difficult to get them to give up the MSRP of the car they are buying. Buying a new car and exchanging an old one are two separate transactions, and it benefits you to make them in that order. This price is the sales price of the car plus the additional taxes, fees, and registration costs associated with it. Even if you're dying to buy the vehicle, tell the seller that you might be willing to buy it if you get a good price for it.

The point is that if you buy a car based on the monthly payment you can afford, the dealer will have freedom of control over the total cost of the car. If you plan to finance a new or used car, it's easy to catch up on the monthly payment number when the seller submits the quote to you. Credit Karma notes that dealers will even expand payments to meet their monthly repayment goal, which means more interest accrued on the loan and more time you will have to repay it. The advertised interest rates are usually for the shortest duration of the contract, so getting the monthly payment you want will likely require a longer contract.

Instead, the ultimate goal is to get the dealer to take such a low price that they are willing to pay for the car in exchange for the opportunity to get the metal out of the lot. A car salesman tries to maximize profits and will simply artificially reduce your payment by extending the life of the loan or by requiring more money up front as a down payment. Not only will buying a new car cost you a lot, but the buying process isn't always a pleasant one.