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Walking past the shiny cars in the dealership towards the exit with the mortified 23 year old daughter of a friend trailing behind me, her face bright red with embarrassment, the thought crossed my mind: When did it become normal not to ask “how much does this car cost?” and start asking “what’s the monthly payment?”
I was walking out the door because, unbelievably, the sales person refused to engage with that simple question.
A recent trip to help this young, first-time buyer navigate car dealerships revealed something troubling: virtually every place we looked at now displays monthly payments as the primary price. The actual cost of the car? Buried somewhere in the fine print.
This isn’t an accident. It’s the calculated strategy that defines The Monthly Payment Trap. This approach changes how some evaluate affordability, shifting the conversation away from value and toward manageable debt.
A $25,000 car becomes “just $499/month” – a figure that feels manageable, maybe even a good deal. But at 8% APR over a typical five-year finance agreement, you’ll pay over $30,000. The monthly payment tells you nothing about the total cost, the interest rate, the deposit required, or the loan term.
Monthly payments do matter – if you earn $3,000 a month, you need to know whether you can afford the payment. The problem isn’t that dealers show this information, it’s that they’ve made it the only information that’s easy to find. This changes the question from “can I afford this car?” to “can I fit this payment into my budget?” These are not the same thing. You might comfortably manage $499 monthly while still making a poor financial decision, overpaying, overbuying, or locking yourself into unnecessary high debt.
The practice also makes comparison shopping difficult by adding a layer of friction. Different dealers may use different loan terms, deposits, and interest rates, all designed to hit that appealing monthly figure while obscuring the real total cost.
This “subscriptionisation” of major purchases has spread everywhere – phones, furniture, I’ve even seen monthly payments quoted for mattresses. It’s a shift from ownership to perpetual payments, normalizing ongoing debt in a way that primarily benefits sellers. It’s particularly concerning for first-time buyers who lack experience evaluating the most important number: Total cost of ownership.
The workaround for buyers? Refuse to play their game. Always calculate the total cost. Get pre-approved financing from your bank. Negotiate on the car’s price, not monthly payments. Once you have a firm idea on the actual price of the car, that’s the time to evaluate the dealer’s finance offering compared to your pre-approved loan deal. Your absolutely best strategy? Bring a financially-savvy friend with you who doesn’t get embarrassed haggling.
When car dealerships make monthly payments the default, they’re not making things easier for the customer. They’re making it easier to sell you more than you need at a price you maybe shouldn’t pay. That bundled Extended Warranty and Paint Protection package? At a $3,000 total cost, it’s much easier to upsell at “only” an extra $59 per month for peace of mind.
The question my embarrassed young friend should ask isn’t whether she can afford the monthly payment. It’s whether she’s willing to let someone else decide what affordability means for her.
There is of course the play them at their system. Accept the most favourable deal with all the finance incentives to your benefit then pay off in full after the first month. Obviously you need to check this can be done but is a workaround that can get you a better deal than an out the door price.
Yes, we already discussed that in this thread. Seems that there are often prepayment penalties these days.
It’s been quite a while since I sat across the table from a salesperson to BEGIN negotiations on vehicle purchase. In fact the last time I did that, the high pressure tactics were so distasteful that I walked out. When the dealership manager called days later to entice me to come back in, I was very clear that there was no amount of discount he could offer that would cause me to do business with his dealership again.
Instead I negotiate the price before I ever walk in the door. Dealerships have had internet sales teams for 20 years. Once I have identified the car that I want, I contact multiple dealerships and put them in competition with each other. I am fortunate here in SW Ohio to have so many large cities within a short drive. Heck, for the right price I may even go to the state up north (outside of football season of course). And many dealers will deliver a car to you for a reasonable fee.
I have been amazed at how some dealers even will negotiate against themselves. If I just leave an email unanswered for 24 hours, I’ll get a follow-up lowering the price or adding some dealer goodies.
I typically buy used and there are apps out there that can tell you how long a car has been sitting on a dealer’s lot. If they have a car they can’t move they are more motivated to negotiate. This is valuable even if it’s not the exact car I want (like wrong color for example). I can take that offer which I have in writing and use it to negotiate with a dealer who does have a specific car I want.
This works great and all from the comfort of your own couch. Unless it’s a Toyota and then, then all bets are off because they barely make to the lot before someone scoops them up.
Re: Toyotas- the last two vehicles I bought were a Tacoma in spring 2020 (at the very start of COVID) went to multiple dealers and only one had the any in stock. The dealer said you can choose between these three. Luckily I loved the integrated color of body and wheels on one.
The other vehicle was a Toyota Crown Signia in November 2025. I could find only one in our state (no sales tax) as they were a new model that fall. We love it. We’ve had it for a year and just completed a 2K trip and have yet to see another anywhere.
Didn’t try to negotiate the price of either vehicle because I knew it was a waste of time. Did negotiate trade in as I never bring in the car the day I find a car. Nor do I ever buy on the day viewed. I always come home and analyze if I want to pull the trigger on buying the next day.
If I couldn’t find a car that I wanted on the dealer lots, what would be the best way to go about ordering one? Would that be a recipe for disaster?
You can order one from the dealer, probably too late for a 2025. The dealer can search other dealers inventory, and probably find the model, color, and options you are interested in. I don’t think there would be negatives to either, however, I’m not a frequent buyer, so perhaps someone with more knowledge could step in with a better perspective.
Thank you!
Six years ago my daughter’s 16 year old car suffered a terminal repair bill so it was junked. I gave her my car and then my wife and I went shopping for a new commuter car. Clark Howard mentioned the USAA buying program so I thought I gave it a try. We went to a Kia dealership on a Sunday and looked over all the Kia Souls and I found one I liked. We went home and I went to the USAA website and looked up that car. Sure enough, it was 2k less there than on the sticker. I selected that car, printed out the guaranteed USAA deal and set up an appointment with the dealer. It was the best experience I’ve had buying a car. I arrived, met the dealer rep, took the car for a test drive and when we got back to the dealership, I said I want to buy it and they honored the USAA price. Took less than 30 minutes with the financing (turning down all their extended warrantees) and setting up insurance with USAA. Even with the test drive I was in and out in less than an hour. I have always dreaded the dealership experience but this was as easy as buying a lawnmower and Home Depot. I know that Costco and Sam’s also have similar programs. I’ll never buy a new car the old fashion way again.
Sounds like a great system.
It is getting harder to find dealers who will negotiate based on price. To avoid surprises, I always ask for their out the door price. Otherwise, you will get some surprise add ons and junk fees.
I bought a new 2025 Camry in January to replace my 2014 one. I always look out 50 to 60 miles because I know where it will be serviced and that dealer likes to play games. I was clear with every dealer I talked to but some refused to negotiate that way. I finally found a dealer and salesman who understood and they got my business. They were easy to deal with.
It is a pity so many big city dealers refuse to negotiate that way.
Oh well. I am just old school.
Unfortunately, this is right on par with the articles that start coming out during tax season, usually with the headline of something like, “People are reporting smaller refunds this year.” Looking at the wrong end of the horse!
Bottom line on car dealerships is that you need to know the TOTAL cost of buying a given vehicle, regardless of how you plan to pay for it. You must be willing to walk out the door when the BS starts flying (usually in the finance managers office) and be willing to shop around. When I am shopping for a vehicle, I am astounded by the number of customers that don’t even try to negotiate on the price they are given and just proceed with the purchase. For me, at that point, let the games begin! Never go into a closed door meeting with anyone at the dealership. And just because they show you a number on a computer screen to, “prove to you that they are only charging you for whatever option at their cost”, it doesn’t mean anything.
With their family just returning from an assignment in Okinawa, I recently assisted my daughter and son-in-law with two vehicle purchases in Norfolk. This was the first time I had ever had the FM at the dealership tell me that they record (video and audio) the conversation. It’s posted on the wall as well. After we went through the seemingly endless sales pitch on options my daughter told them they didn’t want, we told the manager we needed time to talk about their offer, which of course was their, “rock bottom pricing.” As we talked, I noted that the FM went across the hall to sit in the GM’s office (all glass office fronts). It dawned on me that they could be listening in to our “private” chat so we candidly scripted our conversation on the fly which ended with my son in law stating they could probably do better elsewhere. To the surprise of the FM, we simply got up and walked out stating that my daughter wasn’t feeling well and we had to leave. It was like a Festivus miracle (Seinfeld) when the GM called the next day with an offer of an “employee pricing special”, saving the kids a couple grand and a few goodies tossed in. And yes, we went thru the purchase agreement in fine detail. Stand your ground!
Walking out the door is a powerful motivator to get dealer to negotiate seriously
Going into a dealership with the right mindset—plenty more fish in the sea, in no rush to buy, and a willingness to walk out the door—certainly gives you more leverage during the buying process.
That would be a reason to buy a Tesla. Buying a car even using Costco is still a nightmare when dealing with finance manager after the sale. I remembered helping my son, there is a fancy screen cover the whole table, he started the conversation as “We have 3,5,7 years service plan and/or extended warranty, this is the new model for this year, so there will be issues, should we go with 7 years? that would be the best one.” so the assumption is you have to chose one of those plan while you do not need to.
The worse is now even on the EV, BMW still want to sale you service and extended warranty plans.
I would love a BYD the Chinese EV that because of tariffs would be prohibitively expensive in the U.S. but is technologically superior to any American EV.
BYD vehicles are very popular and offer great value in my part of the world. They’re now the second-best-selling EV manufacturer in the UK, and one of their hybrid SUVs ranks as the sixth best-selling car this year.
Ugh, so true Hung.
When assisting my niece with a financial matter recently, she focussed on the monthly amount when deciding whether to make the purchase. Sales people know this. I took her aside and suggested that the affordability of the monthly payment was irrelevant if the total out of pocket cost was exorbitant.
Around 5 years ago, my wife decided to replace her car with a new one. The salesman quoted their best price if we agreed to finance it through the dealer. Their best cash price was two thousand higher. And he would not budge. That is when it confirmed in my mind that selling the car is less profitable than selling the financing of the car.
Your article is spot on.
You might not have the answer to this, but what if a buyer did their financing arrangement beforehand with another source, would the outcome be the same if they financed with the dealer? I think the dealer has too many tools up their sleeve and will always be on the winning side.
Good question. Pretty sure the lower price was only available as an inducement to use their financing arm.
Is there anything to stop you financing the car and then paying it off after the first month?
That is what we did, however we had to make the first two regular monthly payments first, in order to avoid the pre-payment penalty. Came out ahead by doing this. And I suspect they have closed that loophole since then.
I bought a Hyundai about 15 months ago and financed it with the intention of paying it off after one month, which is what we did. Before finalizing the deal, we triple checked with the finance guy that we could do so without penalty. There wasn’t a problem. I guess this may vary from car company to car company or by dealership.
You did well. I suspect the question of whether early payoff without penalty is possible varies from dealer to dealer.
Spot on.
Pro move. Did that with my last 2 vehicles (2004 and 2017), just make sure there is no early payment penalty.
They have freaking early payment penalties now.
They want to lock you in and make you pay that lovely interest charge lol
Many dealerships have a clause in the contact preventing this.
Shopping for a car, in my opinion, is the ultimate evil. When I bought my car, I used the Costco Auto Program. The price was better than the employee discount for friends and family. I’m sure the dealership was disappointed when I turned down all of the ancillary products. I had no car to trade in, and the salesman was visibly surprised when I pulled out my checkbook to pay in full.
That is how it should be done. Being able to pay in full upfront and willing to walk away puts you in the best position.
pulled out my checkbook to pay in full
I abhor being in debt. I would save up for major purchases. I used to research the dealer cost of the car (plus any ancillary products, usually none) I wanted, added something like $500 as fair profit, and wrote a personal check as my firm offer. Of course I knew I’d have to replace it with a bank check, but the tactic usually impressed them enough to accept my offer. Being willing to walk away and go elsewhere also helped.
Willingness to walk away is important. Several times I’ve had the salesperson claim I was pretty much taking food out of his kids’ mouths only to have them call a day later with their latest best deal. I truly hate car buying!!
I wholeheartedly agree. Buying a car must be the worst retail experience out there… no wonder I keep my cars for years.
How did you come up with a fair profit not knowing all the costs going in to running the dealership well beyond the cost of the vehicle?
Your example of $500 is only 2% margin on a $25,000 car. Best I could find is overall net profit margins on a dealership is 3% or less.
Plus, most car salespeople work all or substantially on commission based off cars sold and the price. Many have to use a draw for income in the weeks of no sale and then pay it back.
Many weeks while I was growing up my father, a car salesman, had no income.
Fair profit really has nothing to do with it. Dan offered a price; the dealer accepted it. Done deal. If the dealer thought it was too low, he could refuse. Bottom line is: the maximum price the customer is willing to pay has to be greater than the minimum price the seller is willing to accept. Everything else is a negotiation.
Agree the idea of fair profit is a nonsense in such an unequal bargaining situation. Your job as a consumer is to take every dollar you can off the table not to be a charity subsidising a salesman’s choice of career. All dealerships could adopt transparent fixed pricing and have staff on salary if they chose. That they don’t tells you a lot about the amount of manipulation that you walk into.
I wasn’t replying to Dan, but to the person who said they add an amount in their offer and asked how they determined a fair profit. I also mentioned somewhere about being fair to the sales person working on commission.
There’s no transparency in car pricing. Most dealers make much more on after sale service than in selling the vehicle. Then there is the trade in. You’ve reported selling your last car for $6000 after getting a quote of $7000 for needed repairs. I’ll bet the car was fixed for well under that quote and resold for substantially more.
Actually, I traded it in and received $6,500 allowance I think. I asked the salesmen what they did with it and was told they send a car that old to auction. Probably end up in Havana or for parts.
However, the profit margin is higher on used car sales.
Maybe, but I wouldn’t be surprised if it’s still n the road in NJ!
“I used to…” — I haven’t bought a new car in quite a while. Prices were lower then (e.g., the last one was $13,000 in 2011 when the dealer had 41 new 2010 models on the lot left over from the 2007–09 downturn), so what you’re calling 2% now was probably a higher percentage then. I suppose I could say “what seemed a reasonable guess by me” rather than try to find a technical definition of “fair.”
Also, bbbobbins mentioned “the power of the cash buyer prepared to wait until the last days of the quarter then strike a really hard bargain for a dealership desperate to hit numbers.” That’s what I tended to do. The 2011 instance was an extreme example.
Sounds like a good suggestion. I’m in the market for a new SUV so I need to investigate the Costco offer. I’m going crazy trying to decide on which vehicle to purchase as I’m viewing all the costs after the dealer gives me the keys.
Olin, I was happy with the Costco deal, but I still had difficulties with a couple dealers, this was in 2020 during Covid. The first dealer Costco sent me to, never followed up after our first conversation; Maybe because it was a Costco deal, but I really don’t know. The second dealer told me there was no special Costco pricing at the time; I walked away. The third dealer was awesome, they even had the SUV ready for pickup when I arrived. So you still have to pay attention.
Some people I know get better deals when buying out of state. I guess the only sure way to know you’re getting a good deal is to exit the dealership as soon as you enter.
The OP, Mark, must be a good haggler to be asked to take his friends daughter to the dealership and know when to exit.
I have a friend who was a finance manager at a dealership and he won’t even tell me the caveats to watch out for.
I disagree Mark. If you are buying on affordability and what you can pay must fit into your budget, the monthly payment seems the primary consideration.
Of course, financially you are right, but in practical terms not so much. I would, as you suggest, look for best interest rate before shopping, but in the end it really comes down to the monthly payment if you aren’t paying cash.
Of course you need to be able to afford the monthly payment, but the total cost of the car also matters. As does the number of months you will be making that payment.
The total cost drives the payments, but the number of payments drives the total interest paid, you’re right that is important. Extending payments to get a nicer car probably is not wise.
Likewise about 25% of all cars are leased and about 70% of luxury cars are leased which is also a way of driving something a person may not be able to actually afford.
We have paid cash for our last five cars, keeping them ten years or so or until they weren’t worth repairing while saving up for the next purchase. I must admit I am lousy at negotiating with a salesman, maybe because my father’s stories from the salesman side are still in the back of my head and I feel guilty.
I paid for my last car with a debit card. Even when about to do so, the salesperson was still banging on about speaking to their finance team; I got the impression paying cash was an alien concept for the salesperson.
The dealer I use says 70% of their cars are leased and most of the other 30% are cash.
While the monthly payment is obviously a major cash-flow consideration, in my mind, the final negotiated cost basis for the car is the prime financial metric. From this figure flows the monthly payment amount; it’s the common denominator that allows you to compare value across multiple offers and deals.
Totally agree—comparison is just about impossible if considering monthly payment. There are too many variables.
At the end of the day it is about having an affordable payment, still, you have to do your homework regarding available incentives, interest rates if buying, the money factor and residual value if leasing, the ultimate price of the vehicle, and be smart enough to turn down all the extra stuff.
Are you saying I need a spreadsheet to buy a car? 😎
Dick, I would never do that to you.
This can’t be the same RDQ. Isn’t that a path to recklessness? A whole load of “affordable” monthly commitments and a job loss suddenly lead to desperate outcomes.
I’m teasing of course, there is a middle ground where I’m sure finance options do make sense. But make no mistake the “convenience” of finance options is a game stacked against consumers and one that encourages upgrades more into the “want” than “need” category.
I must admit I was the benefit of advice from a much more senior colleague quite early in my career. He said one of his biggest regrets was his fondness for nice cars exercised whenever he could “afford” the upgrade which had resulted in far lower savings than he felt he should have accrued.
All i said was the monthly payment is what must fit into the budget. That payment reflects what you spent on the car. It’s like saying the amount you can afford for a mortgage payment and taxes limits what you pay for a house.
The worst thing to do is go house shopping and find your dream home and then rationalize that you can make a higher payment to get it when you can’t afford it.
Yup. I’ve even heard some speculation that incentives at car dealerships are such that they really don’t mind seeing cash buyers walk away as they’ll earn more in commissions on selling the same vehicle on finance.
Of course that tips things over to the power of the cash buyer prepared to wait until the last days of the quarter then strike a really hard bargain for a dealership desperate to hit numbers.
That said I’m aware there have been some crazy cheap lease deals , at least in UK, on EVs recently. No ownership but at a price that doesn’t really matter.
I have seen crazy good lease deals on EVs in the US as well.