Because that is exactly how the sales representative likes to play his game! You know, based on your budget, that you can only afford $150 a month. Like a sheep, you tell the sales rep this fact. He goes back to the "office" or wherever, and comes back and says, "If I can get you this car at $175 a month, will you buy it today?" You think, why not? It's only an extra 25 bucks, so you say "yes". He comes back and says you've closed the deal. An extra $25 dollars a month equals $1500.00 on a 60 month loan. In one smooth move, he got you to raise your bid by $1500...and his commission. Instead, first sit down at home and work out what you can afford each month. Multiply this by sixty (or whatever number of months you wish to spread out the payments). This should be the final price of the car you settle on purchasing (plus your down payment, if you have one). Tell that sales rep you want to settle on a price before you talk financing. If he says, "How much were you looking to pay each month?", you say, "I will discuss financing after we have agreed on a price." If he says, "Given your credit history, I can't let you have this car at this price", you say, "My credit history should affect the financing, NOT the price of the car." Talking price apart from financing makes most (not all) sales reps edgy, which is why you should do it. Pay a visit to www.beat-the.com/mailbag26.html for more ideas.

The reason you hear that advice is that negotiating a price is a one topic conversation: "How much?" It's very easy to keep track of where you stand. Once you've negotiated a car's price, the monthly payments will be determined by a number of factors, but the amount you're borrowing is only determined by the price, plus tax and license, minus your down payment. Payments however, are not just determined by the amount you're borrowing; but the term of the loan and the interest rate you're getting. When negotiating with a dealer, they prefer to negotiate with payments because #1, as I mentioned, the variables involved in determining a payment and keeping the actual price out of the conversation gives him an advantage regarding holding a higher profit. Every $20 per month you give represents approximately $1000 when buying a car on a 60 month purchase (if your credit is good... that's about a 7% interest rate). It's easier to say yes to $20 than to $1,000; and if they have some 2.9% factory rate, $20 per month will represent closer to $1400. Doing the math backwards, if you have a budget of say, $200/month, and have $2,000 down, that gives you about $12,000 including tax and license to spend for a car- if buying on a 60 month loan at about 7% interest. The car, plus T & L, = $12,000... minus your $2,000 leaves you $10,000... $10 times $20 = $200. You could negotiate the price to $12,000 incl. T&L and end up with $2,000 down and 60x $200. However, if you negotiate with $200/month with $2,000 down, the price of the car could change for a couple of reasons: If they have a cheap special interest rate from the factory, that payment will borrow more money. They could bump the term of the loan up to 72 or even 84 months, or switch you into a lease, where you are only financing half the car. No matter what, one thing remains constant- Mathematics. No matter how slick a dealer you've got in front of you, they can make 2+2 come out to anything but 4. Do your math before you shop. I spent 24 years in the car business- half of that as a Finance Manager. I hope that this explanation is clear enough to help you.

Monthly payments can be deceptive - what are the hidden costs, what is the interest rate, are there any early pay-out fees, what's covered, what's not? My advice, from my time in the car industry: look into finance yourself, in your own time. If you must, work out how much you can afford a month - INCLUDING maintenance, insurance and running costs. Deduct these running expenses and you will come up with how much you can afford in repayments. Now, research different finance companies and find out which one gives you the greatest principal (amount of cash) for that repayment. Try to get a low interest rate, but at the same time avoid anything with nasty fees. Also, it may be a benefit down the track to find one with no early payout fees. Look for Gap insurance (covers the losses involved in replacing a car), and some banks or credit unions even offer things like nullifying the loan if you are killed (sounds macabre, but looks after your family). Get the best deal for finance BEFORE you even go looking at cars. You can also put in an application and get pre-approval if you want to. As far as I know, this does not mean you are obligated to take the money if you change your mind. It is only after you've given away the money that you're obligated to the loan. When you go car shopping, have your target price firmly in mind. If you see a car you like, make sure the dealer has it in stock. Why? Because they're more likely to negotiate price on an instock car than on one they have to order. It is cut-throat, but shop around. Salespeople hate it, but from the customer's point of view you need to minimise your cost. If the salesperson gets pushy with finance and monthly repayments, feel free to tell them that you already have finance arranged. DO NOT allow yourself to be bullied into finance. If you're still looking, don't be afraid to get a quote, but at the same time, don't let yourself be bullied into signing on the line. Tell them you've got a quote and you want to compare it - it's your prerogative. You may find that if you do things this way, you might be able to get the car cheaper than the loan amount, which means you can either only take the amount for the car - this reduces your monthly payment, or you could put a few options or - if it's still within your monthly payment - get a higher spec version of the same car... At the end of the day, if you keep your finance under control, you will get yourself a much better deal, and may even save yourself quite a lot of money.