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Buying a Car: Why You Shouldn’t Focus On the Monthly Payment

If you’re interested in buying a car, you’ve probably heard that you shouldn’t focus on the monthly payment. Focus on the total price first, the advice usually goes, and then worry about the payment. But why is this? What’s so bad about focusing on the amount you’re going to pay every month? It’s a good question, and we have the answer.

Monthly Payments Can Be Deceiving

The main reason that most people tell you to focus on a total price rather than a monthly payment is that a monthly payment can be more deceptive than you might think. For instance, let’s say your budget for a new car is $400 per month. The dealer might be able to easily get your payments within your budget, but to do so, they may have to spread out the payments over a long term such as 72 or 84 months. The result is that the car will be a lot more expensive in the end.

In the example we’ve given, a car payment of $400 per month for 5 years (60 months) equates to $24,000. But the same $400 per month spread out over 6 years (72 months) is $28,800, while it’s $33,600 over 7 years (84 months). If you solely focus on payment, these might all seem like the same $400 per month, but if you focus on the total price, you’ll see that there are major differences between these figures.

The Total Price Can’t Be Misleading

While it’s possible for the dealer to increase the term to make a car’s monthly payment fit into your budget, there’s no way to do that with the total price. Since the total price is final, there aren’t any tricks to make it seem lower than it really is.

That’s why most people tell you to focus on the final price before the payment. If you buy the car at a price that you can afford, you’ll be sure to pay exactly what you want to spend, or less. If you focus on the payment, the dealer might stretch out the term and get more money for the car while still fitting the payments into your budget.

Calculate the Payment, Then Go Back to the Price

Of course, monthly payment is still a very important factor for most shoppers interested in buying a car. As a result, our advice is this: When you’re trying to buy a vehicle, first negotiate the total price, then calculate the vehicle’s monthly payment spread over the term you want.

If the monthly payment is too high, don’t negotiate the payment. Instead, negotiate the price. If the dealer drops the price during the negotiations, only then should you recalculate the payment. And once you’ve reached a deal, be sure to check all the paperwork to make sure you’re getting both the payment and the loan term you want. Both are highly important factors if you’re trying to make sure you don’t spend too much on a new car.

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Doug Demuro
Doug DeMuro writes articles and makes videos, mainly about cars. Doug was born in Denver, Colorado, and received an economics degree from Emory University in Atlanta. After graduation, Doug spent three years working for Porsche Cars North America. Eventually, he quit his job to become a writer, largely because it meant that he no longer had to wear pants. Doug’s work has been featured in a multitude of magazine publications and websites, including here at Autotrader — where he launched the Oversteer enthusiast blog — along with Jalopnik, GQ, and The Week. His YouTube channel has hundreds of published videos and has racked up hundreds of millions of views. Today, Doug lives in San Diego, California, with his 1997 Land Rover Defender 90 NAS, 2005 Ford GT, and 2012 Mercedes-Benz E63 AMG Wagon.

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