Car Buying 101 - Why your car payment should never be top priority when buying a car

Car Buying 101 - Your Car Payment Should NEVER Be Top Priority (Especially At The Dealer)

If you're looking to buy a car whether it's new or used please don't make the payment your top priority because if you do there is a good chance that you can end up paying way more than you need to on the car just because you're not prioritizing things in the right order now i don't want you to feel like your car payment doesn't matter because it does if you really can only afford about 400$ a month for your car and you look at a certain vehicle and it's gonna be about a thousand dollars a month then obviously you really can't afford a thousand dollars versus 400$ according to your budget but i'm just trying to make the point here that you don't want to be making your payment the number one priority otherwise you're going to end up paying way more for the car if the dealer really knows that and they can take advantage of that situation because the biggest problem a lot of consumers have with putting the payment as their top priority is that you can really just move numbers around and get that number to work for them and the problem with that is a lot of the time.

It's not worth it and so i'm going to give you guys some examples here so you can see exactly what i'm talking about as to why you don't want that payment as your top priority so let's pretend that you decide that 400$ is what you can afford for a car and you go into a dealer and you find a car that's going to work for you and it's twenty thousand dollars at five percent interest over a five year loan period now that payment is going to end up being about 377 dollars a month which is kind of right on par with what you've decided your budget is at 400 bucks so that's just a normal example here of getting your payment right where it needs to be but the problem is is if you prioritize that payment all the way to the top and somebody knows that and they take advantage of you then it can end up being a real problem because let's say that you went and bought that exact same twenty thousand dollar car but the dealer now charged you two thousand dollars more for the car.

Because they knew that they could and they charged another three thousand dollars of fees and extras and different service agreements because you agreed all of that so now that twenty thousand dollar car is now twenty five thousand dollars now what the dealership is going to do is they can actually raise the interest rate let's say they go up to seven percent so they can actually make a little bit of a cut on the interest rate as well and then they just raise the term to an 84-month loan so that ends up being a seven-year loan rather than the five that we had earlier and believe it or not you run the same math and you are going to pay 377$ bucks a month again for this exact same scenario for a car that's costing you five thousand dollars more two years longer on the term and two percent more in interest every single month but the worst part about this mistake is how much it's actually costing you in the end because that twenty five thousand dollar car after interest and when the loan is complete that sucker is going to cost you thirty one thousand seven hundred dollars when everything's finished versus the twenty thousand dollar car the same scenario could have cost you twenty two thousand seven hundred dollars instead so that's a nine thousand dollar swing all because you are prioritizing the payment which is something you don't wanna do you actually want to prioritize other things in the car and that's what i'm going to go over next so my advice here in that exact same situation would be to follow a different order of operations here and the first thing you want to do is you want to get the best price possible so let's say that you go online and you find out that that twenty thousand dollar car most people are actually paying about eighteen thousand for it so you shoot for that at the dealer.

let's say that you do get that price at eighteen thousand bucks and then you wanna focus on the rate you're getting so obviously you've got to have good credit but generally if you go through a credit union you can get the best rate and right now rates are about 2.5 to 3 percent so let's just pretend that you do get a 3 rate and then the last thing you want to take care of is how long you're going to have the loan for and honestly in my opinion i don't think the car loan should be higher than 60 months because that is just a recipe for going upside down in your car meaning you owe more than the car is actually worth so let's pretend that you do stick with a 60-month loan now i'm going to show you guys this math side of things because it's a lot better than even the other scenarios that i showed you so in this equation of not prioritizing the payment you got the car down to 18 dollars congratulations you got the rate down to three percent which is excellent and then you stuck with a 60 month term or five years because you know that you don't want to go over that and so now your monthly payment is only going to be 323 bucks a month which is still well within your 400 a month budget and you're going to spend a lot less in interest because in total when everything's finished this scenario is going to end up costing you 19400$ which is only 1400 bucks in interest versus the other scenarios i was telling you that was about 5000$ in interest.

so you really want to prioritize different things with your vehicle and not prioritize the payment prioritize the price of the car the interest rate and the term meaning how long it is because those are a lot more important than just the payment because like I said you can always just move numbers around and you can get that payment to where anybody wants it but it doesn't mean that that's a good value now if you are curious how many cars you can actually afford I do have a video over here that kind of goes over a simple math equation to figure out how much you should really be spending on that monthly payment so check that out if you're interested but thanks for visiting this one have a great day.

Post a Comment

0 Comments