If you're looking to buy a car whether it's new or used please don't make the payment your top
priority because if you do there is a good chance that you can end up paying way more than you need
to on the car just because you're not prioritizing things in the right order now i don't want you to
feel like your car payment doesn't matter because it does if you really can only afford about 400
a month for your car and you look at a certain vehicle and it's going to be about a thousand
dollars a month then obviously you really can't afford a thousand dollars versus 400
according to your budget but i'm just trying to make the point here that you don't want to be
making your payment the number one priority otherwise you're going to end up paying way
more for the car if the dealer really knows that and they can take advantage of that situation
because the biggest problem a lot of consumers have with putting the payment as their top
priority is that you can really just move numbers around and get that number to work for them and
the problem with that is a lot of the time it's not worth it and so i'm going to give you guys
some examples here so you can see exactly what i'm talking about as to why you don't want that
payment as your top priority so let's pretend that you decide that 400 is what you can afford for a
car and you go into a dealer and you find a car that's gonna work for you and it's twenty thousand
dollars at five percent interest over a five year loan period now that payment is going to end up
being about 377 dollars a month which is kind of right on par with what you've decided your budget
is at 400 bucks so that's just a normal example here of getting your payment right where it needs
to be but the problem is is if you prioritize that payment all the way to the top and somebody
knows that and they take advantage of you then it can end up being a real problem because let's say
that you went and bought that exact same twenty thousand dollar car but the dealer now charged
you two thousand dollars more for the car because they knew that they could and they charged another
three thousand dollars of fees and extras and different service agreements because you agreed
all of that so now that twenty thousand dollar car is now twenty five thousand dollars now what the
dealership is going to do is they can actually raise the interest rate let's say they go up to
seven percent so they can actually make a little bit of a cut on the interest rate as well and then
they just raise the term to an 84-month loan so that ends up being a seven-year loan rather than
the five that we had earlier and believe it or not you run the same math and you are going to pay
377 bucks a month again for this exact same scenario for a car that's costing you five
thousand dollars more two years longer on the term and two percent more in interest every
single month but the worst part about this mistake is how much it's actually costing you in the end
because that twenty five thousand dollar car after interest and when the loan is complete that sucker
is going to cost you thirty one thousand seven hundred dollars when everything's finished versus
the twenty thousand dollar car the same scenario could have cost you twenty two thousand seven
hundred dollars instead so that's a nine thousand dollar swing all because you are prioritizing the
payment which is something you don't want to do you actually want to prioritize other things
in the car and that's what i'm going to go over next so my advice here in that exact same
situation would be to follow a different order of operations here and the first thing you want
to do is you want to get the best price possible so let's say that you go online and you find out
that that twenty thousand dollar car most people are actually paying about eighteen thousand for it
so you shoot for that at the dealer let's say that you do get that price at eighteen thousand bucks
and then you want to focus on the rate you're getting so obviously you got to have good credit
but generally if you go through a credit union you can get the best rate and right now rates
are about 2.5 to 3 percent so let's just pretend that you do get a 3 rate and then the last thing
you want to take care of is how long you're going to have the loan for and honestly in my
opinion i don't think the car loan should be higher than 60 months because that is just a
recipe for going upside down in your car meaning you owe more than the car is actually worth so
let's pretend that you do stick with a 60 month loan now i'm going to show you guys this
math side of things because it's a lot better than even the other scenarios that i showed you
so in this equation of not prioritizing the payment you got the car down to eighteen
thousand dollars congratulations you got the rate down to three percent which is excellent
and then you stuck with a 60 month term or five years because you know that you don't want to go
over that and so now your monthly payment is only going to be 323 bucks a month which is still well
within your 400 a month budget and you're gonna spend a lot less in interest because in total when
everything's finished this scenario is going to end up costing you thousand four hundred dollars
which is only fourteen hundred bucks in interest versus the other scenarios i was telling you that
was about five thousand dollars in interest so you really wanna prioritize different
things with your vehicle and not prioritize the payment prioritize the price of the car
the interest rate and the term meaning how long it is because those are a lot more important
than just the payment because like i said you can always just move numbers around and you can
get that payment to where anybody wants it but it doesn't mean that that's a good value now if you
are curious how much car you can actually afford i do have a video over here that kind of goes over
a simple math equation to figure out how much you should really be spending on that monthly payment
so check that out if you're interested but thanks for watching this one have a great day