Anyone who has sold cars for a living will tell you that most buyers are payment shoppers. More than comparing vehicles, or looking for the best vehicle for their particular needs, they shop monthly payments, which is one of the absolute worst ways to buy a car.
Too Much Info
Here's a cold, hard truth: If you walk into a dealership and, right off the bat, give the salesperson your monthly payment limit, you have just told him you're going to buy a car today. All he has to do is get together with the sales manager and work out something --anything -- that fits near your monthly limit, and the deal is done.
Here's how this works: After hearing your monthly payment limit (let's say it's $500) the salesperson starts asking about what kind of car you want. Since you've thought about the vehicle less than you've thought about the monthly payment, you're probably kind of unsure about this yourself. All this time he's working his mind through his inventory -- any good salesguy knows his inventory -- and trying to put you together with something that will come close. "Close," not necessarily on or below, to your stated limit.
Maybe you think you're looking for a two-door, but if he has a four-door that's close he'll steer you that way. So, you look at what he has, you kind of settle on something and you take it for a test-drive. Trust me on this; whatever you test-drive is going to feel a lot better than whatever you drove to the dealership. You're tired of the old car, and the salesperson knows that if he gets you behind the wheel of something new or newer, you're going to start taking possession, as they say. And the longer you drive it, the more possession you're going to take.
Eventually you end up at a cubicle or desk and he writes up the deal, with your offer, including your limit for the down payment (let's say it's $2,000) and your $500 monthly payment (sometimes known as the downstroke and the nut, by the way). You may initial it, indicating (psychologically, at least) it's your confirmed offer to buy that car that day. Then he takes it to the sales manager -- and, just for your information, I've met literally hundreds of sales managers and not one of them was stupid, so don't think you're going to out-clever them -- who starts figuring the real deal that is actually going to happen.
More Or Less
The salesguy, all smiles, brings it back and says he's got a deal for you. They'll let the car go with $5,000 down and a monthly payment of $575. You respond: "Whoa! What happened to my deal of two grand and five hundred? I can't do a down payment of five grand!" So the salesperson says, "Well, what can you do? Can you do forty-five hundred? Can you do four?" And, pretty soon, you say you can do $3,000 down, but you can't do $575 a month, no way. So, he says, well, what can you do? (See a pattern here?) Can you do five-fifty a month? And you allow that you can probably squeeze it to $525. (In the parlance of the trade, you have bumped yourself up. You did this to yourself. He was just asking.) So he says, "Fine, let me see what my manager says."
Back to the sales manager he goes. Then he comes back, with another deal. OK," he says, "My manager will let the car go for a down payment of only $3,500 and a monthly payment of just $535." And you're starting to think, well, I could make that. And you agree to the deal. You're tickled pink. You've got a new car to show off to the neighbors.
And what you didn't notice, because you were so wrapped up in the down payment and monthly payments, and all revved up about showing your new car to the neighbors, is that the payments were reduced by bumping the payment schedule from 60 to 72 months. And when he points it out -- because he has to, and he's going to be very careful and have this all up front just to cover himself -- you'll buy into it because you're just glad they were able to get close. Besides, you knew all along you could really cover more than $500 a month, and so did he.
How did he know this? From experience. Because you did what most car buyers do. They shop for a payment, rather than a vehicle. And when they give an upper limit for that payment, they lie, because they can always do more. And the salesperson and the sales manager know that. They know that if they can get you near a car you like, you'll bump yourself up. They know this from experience. They're not stupid.
Avoid the Trap
How do you avoid this? Do your research. Spend some cold, hard time working out sound decisions about what vehicle you want, and why. First shop the vehicle, then shop the price. Know up front what it should cost and what you are willing to pay. If at all possible, arrange financing before you walk into the dealership. Take some time to educate yourself. Take responsibility for your purchase. If you don't, they will.