When you go to buy that new or used car, it’s natural to estimate the amount per month you will have to pay back, but don’t base your decision on this figure alone. Once you have gone to an online car financing site or a credit union for pre-approval on your loan now is the time to see if the dealer can beat your online car loan APR. If he can, finance through him. If not, use the online car loans. But still, don’t look at your monthly total to the exclusion of the whole price.
What happens if you base your decision on the monthly total? You could end up paying a lot more in the long run. Your dealer will be anxious to give you the monthly terms you are happy with, but he is just as likely to factor in some other costs that you don’t realize are there.
Another problem is that these monthly costs could go on and on. Much longer than you thought they would. Things change from year to year. Jobs change, children arrive – or leave. Needs change. So you don’t want to be locked into a car payment that’s going on for years and years. You will want the option of changing the car if you need to do so.
When thinking in terms of monthly payments, use them to check the total payment amount that the dealer gives you. If it differs from yours by more than a dollar, don’t sign. They may have sneaked something extra in. Even if they make it sound like silly little amount, multiply it by the number of months you have the loan for and see how it adds up. Don’t be fooled by the fact that they are using a computer. The computer is only as accurate as the one who is using it.
Make sure you have the booklets with look-up tables in them that you can get at online financing sites. The books are accurate; don’t let anyone tell you differently. If you want to keep your monthly payments down as far as possible the best way to do so is by paying more up front. 20% down on a new car is a good rule of thumb and if you can’t afford that, maybe you should look at buying a good used car instead. That way you won’t be caught with more than you can really afford.