Why they say we shouldn’t negotiate the monthly payment

You’ve probably heard this before from a friend or colleague. We must not negotiate the monthly payment when buying a new vehicle, but rather make sure we negotiate the total price of the contract. In the end, it comes down to the same thing, but it is how you approach the situation that will differ.

Let’s start by taking a look at the different components of a new vehicle purchasing contract. In fact, we’ll simplify things and look at three elements: the monthly payment, the amount before taxes and the total amount.

If you are told not to look at the monthly payment, the idea is that you probably shouldn’t approach the dealer saying “I can spend $ 300 a month.” The reality is that it then becomes possible to play on the terms of the contract, thus reducing the monthly payment. Let’s look at an example where a particular vehicle costs $ 20,000 everything included. On a 60-month contract, the monthly payment will be $ 333 (let’s leave everything at 0% interest for simplicity). If you put the same vehicle on 72 months, the payment decreases to $ 277. If there is no interest, it is less dramatic to add one more year, but know that this is still one more year with debt.

Often, the interest rate will be different according to the terms and if it is higher for 72 months, you end up paying more in interest fees.

So when you negotiate with the dealer, negotiate the contract amount before taxes and before your trade-in (if you have one). The discounts should be calculated on the amount before fees, and then you will be able to see if the monthly payment in the end is within your budget.

Thank you to Morrey Nissan of Burnaby for their help with this article.