The Three Worst Things You Can Say to an Auto Lender

auto dealership - auto lenderHeading to the car lot to pick out a new ride can be a lot of fun. Talking to the auto lender, however, can feel a bit like a hostage negotiation. After all, you're trying to get the best car you can get for the best price, while the dealer simply wants to make as much money off you as possible.

And unless your bottom line is truly bottomless, you don't want to leave the lot knowing that something else in the budget -- like groceries -- will have to be sacrificed in order to afford that new, monthly car payment.

So before you go car shopping, be forewarned. These are the three worst things you can say to an auto lender.1. "I can afford to pay $X dollars per month."

Bad idea, as we've mentioned before on WalletPop.

Granted, it seems logical that you would tell an auto lender what you can afford to pay. Why on Earth wouldn't you tell them how much you afford to spend each month on your car?

Because, says Jimmy Williamson, a member of the National CPA Financial Literacy Commission, "lenders and car dealers will then hit you with a loan paid out over 72 months or longer at exorbitant interest rates. Instead, negotiate the best cash price for the car before you even mention monthly payments or terms."

There are other factors you should be thinking about beyond your monthly payment, according to Gary Pierce, general manager for the auto division at "It's important to also look at the total cost of the vehicle, the interest rate and the cost of borrowing over the life of the loan," Pierce says.

Another reason not to quote a price that you're comfortable paying every month is that the car salesman will likely get you to nudge yourself to a higher price, says Phil Reed, the senior consumer advice editor at

Reed worked as a car salesman for several years, and when he was being trained, he says he was taught that if a customer said they were comfortable paying $400 a month, the salesperson should say, "$400 up to ... ?"

The consumer would then likely stammer and say, "Hmm ... $450."

"So you've already gotten them to negotiate with themselves," Reed says. "They've agreed to pay $450, and then the salesperson comes back and says, 'Well, we couldn't do $450, but we can do $475.' That sort of thing goes on all the time."

So how do you avoid talking about what monthly payment you can afford? "What we always recommend is that you get pre-approved for a loan before you walk into a dealership, even if you're possibly going to borrow from the dealership," says Reed. "If you can walk in there and say that you have pre-approved financing, that you don't want to talk about the monthly payment, and that you only want to talk about the price of the car, you've completely disabled their main tactic."

What's more, you're more likely to get a better deal because once you're in the room with the finance guy, he'll ask about the interest rate you've been pre-approved for, Reed says, and quite possibly the conversation will go like this:

Finance manager: What's the rate you're approved for?
You: Six percent.
Finance manager: I can offer you 4.5%. Are you interested?

And that, says Reed, is when you say, "Of course, I'm interested."

2. "I've had a few financial problems, but my credit is okay."

Hey, what's the problem? You're just being honest and preparing the salesman for whatever they're already going to see on your credit report, right?

It would seem so, but Reed says that car salesmen is likely to adopt a position of, "Your credit is weak, and I'm going to help you out." As Reed explains, "Immediately, the consumer feels as if this guy is trying to help them out, and so they can't bargain with them."

But there is plenty of room to bargain, from the interest rate to the extended warranty -- should you decide you want one -- to the add-ons that the dealership will try to get you to purchase. But from the moment the salesman is "helping" you and doing you a favor, you can pretty much be guaranteed he's going to do you no favor at all.

3. "I don't care how you do it, just get me into a car."

"That's exactly what the people at the car dealership want to hear," says Reed, "and believe me, they'll do everything they can to get you into a car."

If you make the comment as soon as you arrive on the lot, you're pretty much saying you've already given up. And if you make the comment in the middle or near the end of the negotiation, the dealer knows just how desperate you are. By admitting you want them to do anything to get you into a new car, you've signaled that you're willing to take whatever they can offer you.

But if you're really that desperate, you should probably stick to either buying a car through the Internet, or at least bringing in a friend or relative to help you negotiate.

"They have a name for those customers," Reed says of the consumer who waves the white flag. "Salespeople will come into the back office and say, 'He was a 'get me done' sale."

And while you may not have a lot of room to maneuver -- "Your credit score will usher in the final decision, and there's only so much tap dancing you can do," Reed says -- you certainly don't want to take a weak position from the beginning.

Geoff Williams is a regular contributor for WalletPop. He is also the co-author of the book Living Well with Bad Credit.
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