For the OP, go on Youtube and watch a few videos from The Homework Guy and CarEdge.
Yes, what fits in your budget. If you tell the dealer what you want the monthly payment to be you are done for.
Before you go to the lot!
- Determine your monthly payment for your car like $400
- Go to your bank or credit union and get preapproved. This way you know your interest rate or if you will have an issue at the dealer.
- Figure out what out the door price you are comfortable with. That’s car + tax + title + dealer fees. If you watched the videos you know pretty much every other fee and add-ons are BS. Tax and title are not negotiable but price and dealer fees are. If you are in a state like Colorado which under state law a dealer has to charge everyone the same fee, ask them to take it off the car price.
“I’m not paying the dealer fee.”
“Sir. By law, I have to charge everyone the $799.”
“So take $799 off of the price of the car and call it even.”
4a) Pull up an amortization calculator like this one. Note: if you would rather use Excel, let me know. I used to have my students build a basic amortization spreadsheet when I taught financial algebra. Change the term to get in the payment range you want. Note: typically the interest rate goes up slightly when you increase the term but we are just doing an approximation to be prepped when you go onto the lot.
4b) I’m sure there is an app out there that does this. If so, download it so you have it on the lot at your fingertips. DO NOT let the salesperson start running scenarios for you. YOU take the power.
Extra) Payments are proportional to the price. Meaning let’s say you have estimated that financing $35000 at 6% interest over 5 years means your payments are $675 per month. Oh wait! I want that Highlander at $55,000 financed. Don’t talk to the salesman. Do this.
Take out your cell phone and pull up the calculator.
New ÷ Old = 55000 ÷ 35000 = 1.57 (rounded)
Multiply this by your old payment. 1.57 x $675 = $1060 (approx)
So you quickly and without the salesman trying to sell you know that at 6% interest over 5 years that Highlander will cost you about $1060 per month.