When considering a loan or a lease, your common sense is to contemplate what your regularly scheduled payment will be. Resist that impulse. You must, obviously, figure out the regularly scheduled payments included in a loan. But that number alone lets you know almost nothing about what you are paying for cash. If you just mention a payment amount, for example $410 or beneath – to a salesman or finance specialist at a dealership, they have enormous leeway in structuring the loan. For example, by extending a $15,000 loan from three years to four years, they could cut your regularly scheduled payment from $465 to $371 while expanding your interest rate from 5% to 8%. Meanwhile, the total amount you paid out might increase from $16,420 to $17,910. But you might be aware of none of that, as all you are advised seems to be: “Well, with a four-year loan, we could put you in this car for $371 a month.”
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