Three numbers to set before you shop

Write these down at a kitchen table, not on a lot. A dealership is a pleasant place full of people whose job is to help you arrive at numbers, and the numbers they help you arrive at are rarely the ones you would have chosen alone. The card below is meant to be printed, filled in with a pen, and carried folded in a pocket. It holds three figures and nothing else.

That is the whole tool. The rest of this page is the back of the card: how to arrive at each figure honestly, and why the order matters.

Box 1The all-in price

Ads, window stickers and most online listings show a vehicle price. What leaves your bank account is something else: the vehicle price plus sales tax, title and registration charges, a documentation fee, any dealer-installed extras, and whatever else gets typed onto the paperwork. That total is usually called the out-the-door price, and it is the only figure worth comparing between sellers. We walk through how the pieces stack up in asking for the out-the-door price.

Setting box 1 means working backward. Start from what you can pay in total, not from the car you would like. If you are paying cash, the figure is the portion of savings you can spend while leaving an emergency cushion intact. If you are borrowing, box 1 is roughly your down payment plus the amount a comfortable payment will carry, which is why box 2 has to be worked out alongside it.

Taxes and fees vary by state and sometimes by county, so do not guess them from memory. Your state's motor vehicle agency and revenue department publish what applies where you register the car. Once you know roughly what they add, subtract them from your total and you have the most you can spend on the vehicle itself.

Box 2The maximum payment, and its term

A monthly payment on its own is a slippery number. Any payment can be made to fit any budget by stretching the loan, which is exactly why the card asks for a term beside it. "$450 a month" is not a limit. "$450 a month over no more than 60 months" is.

To choose the payment, look at your actual month rather than a rule of thumb. Insurance, fuel, maintenance and parking all ride along with the payment, and a figure that works only if nothing else goes wrong is too high. Our piece on how much of your income a car payment should take goes further into that side.

Here is how box 2 feeds box 1, using an illustrative interest rate of 7% APR. It is an example for the arithmetic, not a rate anyone is offering.

Now shorten the term to 48 months and keep the payment at $450. The same arithmetic carries a loan of about $18,792, and the all-in ceiling drops to roughly $22,792. Nearly four thousand dollars of buying power appeared out of those extra twelve months. That is not free money; it is twelve more payments, plus more interest across the life of the loan. Seeing the two numbers side by side is the reason to do this at home, where no one is waiting for an answer.

If your lender quotes a different rate, redo the sum. The rate you actually get depends on the lender, your credit and the car, and it can move between the day you plan and the day you sign.

Box 3The walk-away point

Box 3 is the one most people leave blank, and it is the one that does the most work. Boxes 1 and 2 describe what you want. Box 3 describes what you will refuse, and it is easier to refuse something you decided to refuse yesterday.

It can be a single figure: an out-the-door total, a little above your box 1 target, beyond which you leave. The gap between the two gives you room to negotiate without drifting. But it often works better as a short list of conditions, written in plain words:

• The out-the-door total goes above the figure in box 3.
• The loan term offered is longer than the one in box 2.
• Add-ons are presented as mandatory and will not come off the paperwork.
• Nobody will put the out-the-door price in writing before a credit application.

Any one of those ends the visit. Not with a speech, just with a thank-you and a phone number. The car will very likely still be there tomorrow, or a similar one will be somewhere else, and you will have lost nothing but an afternoon.

The orderWhy the boxes are numbered

Salespeople are often trained to start with the monthly payment: "What were you hoping to spend each month?" It is a reasonable-sounding question, and answering it first hands over box 2 without boxes 1 or 3 attached. From there, a total can grow while the payment stays put, because the term quietly lengthens or a trade-in value quietly shrinks.

So lead with box 1. Ask for the out-the-door total, compare that total against your card, and discuss financing only afterward, and only in terms of the term you already chose. If the conversation keeps circling back to the monthly figure, that circling is useful information about the conversation.

One more habit: redo the card for every serious shopping trip. Savings change, insurance quotes come in, a trade-in turns out to be worth more or less than you hoped. A card from last spring is a card for a different person. Fill it in fresh, fold it, and let the three numbers do the talking so you do not have to.