How to Negotiate Your Car Payoff

Once you negotiate your car payments, you'll be on the road in no time.

Buying a new car can be a long and difficult process. You need to decide what type of car you want to buy, figure out your budget, choose a dealership that you trust, and negotiate your payment terms. By the time you've done all that, you might not have energy left to enjoy your new car. At least one part of the process, negotiating your payments, can be made a little easier with the right techniques.

Instructions

1. Come prepared. When you enter the dealership and start the negotiation process, have an idea of what you can afford to spend on a down payment and what you can afford for a monthly payoff. The higher your monthly payments, the faster your car will be paid off, but you need to make sure the payments aren't so high that you struggle to pay them each month.

2. Determine the price you'll pay for the car before interest or fees are added in. Dealers offer their vehicles for sale at the MSRP, the manufacturer's suggested retail price, but almost all except the most popular cars can be purchased for less. One way to negotiate a price is to offer one percent over the dealer's invoice. You'll get the invoice price, or a close estimate, from a website such as Edmunds.com. The dealer will undoubtedly refuse this offer and make a counter offer, possibly around 8 or 10 percent over invoice. If you get the car for, say three or four percent over invoice, you've done well.

3. Don't allow the conversation to focus on just the monthly payments. The dealer may try to distract you from the amount of interest you'll end up paying by offering a low monthly payment. Once the price of the car is set, the lower your monthly payoff is, the longer the time you'll be paying off the car and the more you'll be spending on interest. The conversation needs to be about all aspects of paying off the car.

4. Make sure you understand everything before agreeing to the terms. Practice active listening skills, and ask the dealer to clarify when you don't understand something. You need to understand all aspects of the car-buying process, including the down payment, the annual percentage rate, monthly payment amount and the total length of your loan.

5. Know the maximum number of years you're willing to take to pay off your car and a maximum amount you're willing to spend on monthly payments before you start negotiating. You should not accept anything higher than these figures.

6. Stay calm. People tend to make poor decisions when emotions are running high. Losing your composure could cause you to accept a bad deal or to storm out of the dealership. These are two scenarios you can help avoid by keeping your cool.

7. Be prepared for the process to take a long time, and be prepared to walk away. Taking four hours or more to buy a car is not unusual, but most people don't plan for it. The long process works in the dealer's favor. It doesn't have to. Realize that long waits are part of the dealer's way of controlling the sale. If you don't like the terms, politely walk away.

Tips & Warnings

• Before you leave the dealership, make sure you have a signed copy of the contract that details the terms of your car payoff plan. The contract should be signed by you and by the dealer.

References

• Federal Trade Commission: Facts for Consumers
• Penton Media, Inc.: Top 10 Negotiation Tips

Resources

• Edmunds.com