this post was submitted on 29 Feb 2024
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Asklemmy
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I'm constantly amazed at how many people don't understand the concepts of basic finance and how compound interest works.
Years ago, I brought my laptop with me to buy a car so I could plug all the numbers into a quick amortization schedule. The sales person offered me a choice of $1,500 cash back or 1.9% financing instead of the typical rate a few percentage points higher.
I plugged the numbers into my spreadsheet and saw taking the cash back would cost me a couple grand more than the lower finance rate. When I told him I wanted the finance rate instead of the cash back, he mentioned that I was the only person he'd seen not take the cash back.
Maybe he was pulling my chain, but in my experience, the average person doesn't know what compound interest is, let alone what an amortization schedule is.
That's wild. When I was getting a mortgage for my house, the lender was like "your interest rate is X, but if you pay $Y you can add a 'point'". I'm like "wtf is a point?" Turns out, it's a roundabout way of saying, higher down payment = lower interest rate.
It already wasn't obvious what their jargon meant, so for you to have a sales person offering the exact opposite of what my lender did, actively bribing customers to take a worse deal for themselves, it's just...scummy.
Thanks! excellent suggestion.
You can also use an interest calculator or multiply the payment by the term length to see how much over the purchase price you'll pay in interest.
This is why it's important to haggle over the purchase price and not the monthly payment. Never ever negotiate over the monthly payment, or you're likely to get stuck with a 96-month loan at 23% interest.
My mother in law bought a truck the same week I bought my car. I mentioned that I got a 1.9% interest rate. She got a 22% rate!!! I was absolutely floored when I found out what she did.
22% is insane, that should be illegal honestly. Pretty much bought it on a credit card.