There are a lot of factors to consider when buying a car, from monthly payment to loan rate and trade-in value. Here are four strategies to help you succeed in the car-buying process.

If you want to get a lower purchase price, don’t discuss a monthly payment. This is a common scenario: A buyer looks to buy a car from a dealership and tells the sales representative that he or she has a certain amount budgeted for a monthly payment – say, $300 or $400.

At this point, the salesperson knows that he or she may be able to sell a new or used vehicle to the customer for almost any purchase price, as long as the monthly loan payment falls within the budget.

While it definitely makes sense to have an affordable monthly payment amount in mind, don’t share it until after you’ve negotiated the purchase price, which is what you’re actually paying for the vehicle.

You may be able to lower your payment by stretching out the life of the loan, but make that decision once you’ve already agreed on a purchase price.

If you want to be a better negotiator, ask several dealers for their best ”out-the-door” price, including sales tax and any additional fees or discounts. Then use the lowest number as leverage with other dealers by asking them to beat the total.

This takes time, but it gives you a measure of control over the negotiations and may help you lower your purchase price.

If you want to get more for your trade-in, negotiate it separately. How does trading in a car work, generally? You negotiate the purchase price, then the dealer tells you what he or she will give you for the trade-in.

You can flip that setup, however. Don’t even mention that you have a trade-in as you begin discussions. Instead, solidify your vehicle purchase price. then negotiate the trade-in separately from the vehicle purchase. Otherwise, dealers can simply lower their trade-in offer anytime they take money off the sticker price.

Start the trade-in process by consulting vehicle price guides and use several resources to get a firm quote.

If you want to lower your total loan cost, put more money down. A larger down payment (typically 20 percent or more of the purchase price) will not only lower your monthly payment, but help get a lower interest rate.

Putting more down also may prevent a scenario called “being underwater.” This is when, over time, you owe more money on the car than it is worth. This scenario often occurs when car loans are extended for long periods, such as 72 or 84 months.

These long-term loans may make your monthly payment less, but can increase the overall cost of your vehicle and come with higher interest rates.

Also, don’t be afraid to shop the loan. Banks, credit unions and insurance companies all offer car loans, and you are under no obligation to finance with the dealer.

Ask about gap insurance. This protects you if your car is in an accident and is totaled and you owe more on it than it is worth. Gap insurance pays the lender the difference between what the car is worth and what you owe on the loan.

Once you have negotiated the best price and lowest payments, call your insurance company. Find out beforehand what will happen to your auto insurance if you buy that new vehicle. If you were driving a junker, you may now need comprehensive and collision coverage added to your policy.

Knowing beforehand the increase in cost of insurance is a smart financial decision.

Remember, it is also your responsibility to notify your insurance company that you have a new vehicle. Do not rely on the dealership to provide that information.

Bob Hollick is a State Farm Insurance agent based in Washington. His column appears every other Thursday in the Observer-Reporter.

To submit columns on financial planning, investing or business-related matters, email Rick Shrum at

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