When purchasing a new or used car, there is a great temptation to shop based on monthly payment alone. After all, you probably already have a good idea of how much you can afford to pay each month, and it is all too easy to simply allow the car dealer to tailor a deal based on that amount.

It is almost always a mistake, however, to let the monthly payment be your only guide. Doing so can be quite dangerous, and quite costly. Many dealers will artificially inflate the price of the car, or the interest rate, while making the calculation, and even if the dealer does not do this, it is probably possible to strike a better deal by treating the car price negotiation and the car financing negations as two separate entities.

In most cases it is a good idea to negotiate the price of the car first, and it is always preferable to negotiate based on the dealer’s invoice price rather than on the sticker price on the window. Negotiating the price up from what the dealer paid, rather than down from the price on the sticker, almost always yields better results. Fortunately, it is easier than ever in these internet days to know what the dealer actually paid for the car. There are literally hundreds of web sites that provide information on dealer prices, and chances are you can find that price in a matter of minutes.

After you have struck the best possible deal on the price of the car you want, then, and only then, should you discuss financing options. It is important to ask the dealer to fully disclose the interest rate, and the loan terms, when negotiating financing for the car. The interest rate is the primary consideration with any loan product, whether the car loan comes from the dealer or from another lender.

It is also a good idea to shop elsewhere for financing before accepting the offer made by the car dealer. While dealer financing can often be a good deal, it is important to compare the loan you are being offered with what you could get on your own. It is a good idea to check with your own bank, credit union or savings and loan, either before or after you visit the dealer. The more auto loan offers you have to choose from, the better your chances of getting the best possible deal.

Brooke Sikula is a freelance writer based in Ventura, CA and writes on a wide range of topics from home improvement to credit repair and everything in between. She is a regular contributor to http://www.loan-mortgage-auto.com and http://www.home-improvement4u.com For more information and advice on credit issues, check out http://www.credit-card-faq.com

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