Quick learning: Car payment
About this video
In this quick scene, a car buyer is excited about a much lower monthly payment. A friend points out that the lower payment usually comes from a longer loan term, such as six years instead of four, so the buyer pays more overall. The lesson: know your payment before you go car shopping.
You'll be able to
- explain why a lower car payment often means a longer loan.
- explain why a longer loan usually costs more overall.
Key words
- Loan term
- How long you take to pay back a loan, such as four or six years.
- Overall cost
- The total you pay across the whole loan, including interest.
Transcript
- Wait, this payment for my new car is way lower. (horn honking) Yeah, I'm going with this payment.
- Okay, but look at that loan closely. - Why? The lower payment fits in with my budget.
- The lower payment usually means a longer loan term. So instead of four years, you're going to be paying for the car for six years and over time, you pay more because the loan is longer.
- Wait, seriously? - Yeah. You have a lower payment, but an overall higher cost. So it's really important to know your payment before you go car shopping.
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