This is always an interesting question, and, to start with, it very much depends on the dealership itself. Most dealerships cannot play too much, because then their surveys are going to be dogshit, and manufacturers do not like that, and have actually taken them away from companies. Now, I saw this at one of my fave sites, Caveman Circus (I’m going to italic it instead of blockquote, to keep their formatting to a degree)
Never tell a car dealership your monthly payment budget
Car dealerships love asking, “What monthly payment are you looking for?” It sounds like they’re helping you, but in reality, it’s a trap.
Why It’s a Bad Idea:
- They’ll manipulate financing to meet your number while stretching out the loan term or inflating interest rates, so you end up paying way more over time.
- They might add hidden fees or extras that seem minor when spread out over monthly payments but add thousands to the total cost.
- It shifts focus away from the real number that matters: the total price of the car.
What to Do Instead:
- Ignore monthly payment discussions. Instead, ask: “What’s the out-the-door price?” (This includes taxes, fees, and everything you’ll actually pay.)
- Negotiate the total price first. Get it in writing before discussing financing or trade-ins.
- Once you have the best price, shop around for your own financing. Credit unions and banks usually offer better interest rates than the dealership.
- If financing through the dealer, negotiate the loan terms separately. Get them to match or beat your pre-approved offer
At times it makes sense, but, look, if you want to go this way you need to know a few things ahead of time, before going in. What’s your credit score? What kind of loan will your bank offer you, and for how much? What’s the rate? What car do you want? What’s the availability? Are there any upfront rebates/incentives from the manufacturer, and do they only apply if you finance through their bank? All of this can be done online before you head on it. Because, otherwise you could be seriously wasting your time, and the time of the rep. Not that most customers care about that.
Let’s say your budget is $500. The quick and dirty average is a $25000 vehicle with $0 down, because for every $5000 it is $100 of payment at 6.97% for 60 months. Things could get better or worse depending on credit and you could stretch the loan out. So, why the heck are you looking at a $54000 vehicle? Heck, even a $47K vehicle? Because that just happened on Saturday. And I straight up said they were either going to have to change their budget up drastically or go with a much higher mileage/older vehicle instead of new. It can’t be discounted enough, not with a 4-5% markup.
So the OTD price means jack if you are so beyond your payment. Just like buying a house, you need to know where your sweet-spot is. No Realtor will show you $600K+ homes when your budget is $350K tops. I’ll stay away from budget until a customer says enough stuff to force me to go there, and if you say $500 we won’t be driving $50000. Or $40K. Not unless you put a lot down. Because The Real Number drives the payment. Consumers need to learn this, and it is shocking how many have no idea, even older people.
On my screen, and most auto focused software, you see the price of the vehicle with everything (not usually finance office product, though), and you see payment. And I can show with downpayment so people can see the reality. Also using a mortgage calculator. One of the things we always say is 80% of the problems are caused by customers, often because they come in with unrealistic expectations. No real estate agent would put up with this. Try buying a boat this way. Or expensive jewelry. They won’t put up with it. These are things that should be taught, but, so often, you get stuff like the above which goes back to like the 50s, and creates problems for the buyers.
