Payment is an output
Your monthly payment is math on price, APR and term. Settle those three and the payment follows.
A monthly payment isn't something you negotiate. It's a result. Three inputs decide it: the amount you finance, the interest rate (APR) and the term in months. Change any one and the payment changes. Fix all three and the payment is just arithmetic.
That's why "What monthly payment are you looking for?" is such a common question. Once you name a payment, the other numbers can be arranged to hit it, and it's hard to see which one moved.
Term is the quiet one. Here's what a $594 monthly payment buys at 7%:
- 60 months: about $30,000 financed
- 72 months: about $34,800 financed
- 84 months: about $39,400 financed
Same payment, nearly $9,400 more borrowed, and two extra years of payments. A buyer who says "I can do about $600 a month" can be shown a pricier car, or a higher price on the same car, and the payment won't warn them.
On the canvas, the payment square is read-only for this reason. You lock the APR and term to your pre-approval, you lock the down payment and trade at home, and you win the price with competing quotes. The payment is what's left, shown so you can check it fits your budget.
If someone asks what payment you want, you can simply say you're shopping by out-the-door price.
Where it fits in the method
- Stage 1: See the four-square for what it is
- Stage 4: Set the numbers before any dealer speaks
- Stage 6: At the desk
Related in the method
- How the four-square works against you
- The walk line
- The first pencil
- A few dollars a month adds up
- Loan-to-value and being underwater