Have you ever noticed that new car sales representatives talk a lot about monthly payments? They ask you what you can afford to pay each month. When it is time to sit down and negotiate the sale, they rarely talk about bottom line price unless you push the issue. Instead, they want to negotiate your monthly payments. There is a very good reason for this, and it’s not one that’s in your best interests.
Car dealerships are in the business of selling cars. They want to sell each car on their lot for as much as they possibly can. There is nothing wrong with that; that’s how business works. The point is to not be fooled when a dealership claims to be putting your needs first. They might try to make it easier for you to buy a car, but their primary goal is still to sell you something for as much as they possible can.
Monthly Payments Are Tangible
The starting place for understanding sales rep mentality is to think of your own position. You are at the dealership because you want to buy a car. The salesperson throws a number like $25,000 at you, but it doesn’t mean much. What’s the first thing you want to know? How much it’s going to cost you every single month. That is because monthly payments are tangible. They are small enough for you to work with.
Sales reps know that. They know that if they can give you a monthly payment you’re comfortable with, you are likely to sign on the dotted line. But guess what? They might be able to get your monthly payments even lower by extending your car loan for an extra year. That’s good, isn’t it? No, it’s not.
Time Equals Money
You have probably heard the old business adage that says time is money. There are a number of ways to look at. In the car-buying game, adding time to a car loan means more money for the financing company. It means more money that you are paying out-of-pocket. It boils down to loan terms, according to Actium Partners, a Salt Lake City hard money lender.
Actium Partners explains that the combination of interest and loan terms (how long you will pay on a loan) determines how much money you pay above and beyond what you actually borrowed. So the longer it takes you to pay back the loan, the more interest you will pay.
The sales rep is only interested in getting you to buy a car. If you buy, he gets his commission. If you don’t buy, all the time he spends with you is spent in vain. It stands to reason that he will try to get your monthly payments as low as possible in order to ensure a sale. He doesn’t care that, in the long run, those lower monthly payments are going to end up costing you more.
How to Negotiate with Sales Reps
So, how do you avoid spending too much? By negotiating the right way. First, do not negotiate based on monthly payments. Negotiate based on sales price. Once you agree to an acceptable price, then you can negotiate monthly payments based on what you can afford. Do not seek to make your payments as low as possible. Make them as high as you can while staying inside your budget. You avoid paying interest this way.
Now you know why new car sales reps prefer to talk about monthly payments. Though it is not in your best interests to do so, it is in theirs. That is how they sell cars.
