What's the Price: A Financial Pet Peeve


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This is a guest post from Kay Lynn Akers as part of the Yakezie Blog Swap. Kay Lynn writes at Bucksome Boomer about money and life on the way to retirement. Read my post about my biggest financial pet peeve at her site.
 

What's the Price: A Financial Pet Peeve


Get that brand new shiny car for just $300 a month! Buy the roomful of furniture for only $100 a month! Do these ads sound familiar? Sometimes it is not possible to figure out the actual price of the product.

Why Monthly Payment

Advertisers focus on monthly payments because they want to attract as many people as possible to the product whether it is a car or a couch. Seeing a payment that fits in the monthly budget makes it seem affordable and a good price.

Low payment amounts means the loan will be extended out for more months and the lender, often the retailer, makes even more money. Another consequence is that the buyer is in debt that much longer.

A friend once told me he wanted the lowest car payment possible. When I last bought a car, I wanted the highest car payment that worked in my budget. I couldn't see still making car payments when it was over six years old. I settled on a 4 year loan and paid it off in 3.5 years. My friend has a 6 year loan and took all of that time.

Benefit of Thinking Price

By focusing on price, the buyer is able to make an informed decision. How do you know if it is really a good deal without knowing the final price? (And I mean before you sign the loan papers.)

You also have more power in the negotiation. If a salesperson knows your focus is price, they no longer have to offer a good deal. Just one that works for your budget. Conversely, if you focus on the bottom line pricing, it forces the seller to make their best offer.

My husband and I obtained our own financing for the car purchase mentioned above. This allowed us to negotiate the best price and take advantage of a $2500 cash rebate versus a reduced interest rate.

Retailers that advertise products only with the monthly payment amount are counting on consumers being too dumb to care what they're really paying. That's why not stating the price is my biggest financial pet peeve. What's yours?


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5 comments:

The Single Saver said...

If more people thought along these lines less people would be in debt!

Sam said...

I think companies make a lot of money from financing and that is why they push long-term plans so much. It turns me off from shopping at stores who push financing options.

Jacob @ My Personal Finance Journey said...

I completely agree Kay! I was actually just talking to my girlfriend about how on car ads these days, the actual price is almost not even shown on the ad because they don't expect any one to be able to pay full price at once anymore!

retirebyforty said...

The bottom line price is the key in any deals. It is really annoying when financing tries to ignore the total price and just present the monthly payment. I don't play that game either.

CFP certification courses said...

Maximum things are depends on the monthly payments. Advertisers focus on monthly payments because they are heavily attract all the possible things. A cfp courses may help in such situation. Seeing a payment that fits in the monthly budget makes it seem affordable and a good price.

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