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I have a 2006 Hyundai Tucson, bought it used with 70K for around $6700.
Financed it thru my credit union who ive been with for over 10 yrs.
Payments are $210 a month for 5 years, and when I paid it off, I will have paid $12,600, so the credit union is basically doubling their money!?
I noticed the same thing years ago when I was married and bought a house, the house was listed for $120K, our monthly payment for 30 yrs was around $850. If we made all the payments, we would have paid $306,000! That means our real interest rate was over 100%...right?
You are forgetting the time value of money (TVM) and of course inflation.
Remember when candy bars were a nickel, a gallon of milk was $1 and gas was 50 cents. You made less money per hour but your money went a lot further. Yes if you make all those payments you will have paid 306K for your 120K house........but what would the house be worth 30 years later?
Figuring actual, total cost of things is a consumer finance basic most people never bother working out. The car was $6700... which probably omits fees and sales tax, to start with, and of course the financing cost. But people will look at you funny if you say it cost $13k.
Location: San Ramon, Seattle, Anchorage, Reykjavik
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Just pay cash for the car. I always hear a form of the argument that 'I took out the loan then invested the money and made a huge profit on the spread'. BS - the average person making the argument went on vacation or spent the money some other way. That is why Americans, as a whole, have no money saved and live pay check to pay check. My recommendation is always buy the car you can afford to pay cash for. Debt is a trap.
Just pay cash for the car. I always hear a form of the argument that 'I took out the loan then invested the money and made a huge profit on the spread'. BS - the average person making the argument went on vacation or spent the money some other way. That is why Americans, as a whole, have no money saved and live pay check to pay check. My recommendation is always buy the car you can afford to pay cash for. Debt is a trap.
I will dismount my soapbox now.
The "average" person will not have that kind of cash anyway, unless we are talking $2500 or something.
I’m amazed how many times I’ve heard people quote how much interest you pay over a 30 year mortgage like it’s a ripoff. You are borrowing a rather large sum for three decades, THREE DECADES. How much do you think is a fair amount to pay to use someone else’s money for 30 years?
Oh, my God!! You're in the fast track to poverty if you keep taking loans with crap interest rate.
My advice before you buy anything else is LEARN ABOUT MONEY LAWS AND RULES OF INTEREST! TAKE A SUMMER COURSE AT YOUR LOCAL COLLEGE ASAP BEFORE YOU WIND UP BANKRUPT!!
Good luck!
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