Why Car Payments Are Misleading
Why car payments are misleading in the US—they hide total cost, term, and rate. Here's what to focus on instead.
Car payments in the U.S. are misleading because they hide total cost, term, and rate—and dealers use that to sell more car than you can afford. Here's why payments are misleading and what to focus on instead.
TL;DR Payment can be "low" while total cost is high—long term, high rate, or both. Focus on out-the-door price and total cost (principal + interest), not payment. Use autopremo.com OTD and payment tools to see total cost.Why Car Payments Are Misleading
1. Same payment, very different total cost
$400/month for 60 months at 6% = ~$20,700 total (principal + interest). $400/month for 84 months at 9% = ~$28,500 total—thousands more. Same payment; total cost is far higher. Payment hides the term and rate.
2. They can sell you more car than you can afford
"If you can do $400 a month, we can get you into this one." They stretch the term or rate to hit the payment—so you're paying for a pricier car than you would if you focused on total cost. You're "affording" the payment but not the total cost.
3. Payment ignores everything else
Payment doesn't include fuel, insurance, maintenance, or depreciation. So "affordable" payment can still mean unaffordable real cost. Use autopremo.com total cost of ownership to see full cost.
See total cost at different terms and rates at autopremo.com.What to Focus On Instead
- Out-the-door price — selling price + tax + fees. Negotiate and agree on OTD first. Use autopremo.com OTD calculator.
- Total cost — principal + interest over the life of the loan. Use autopremo.com payment calculator to see total interest at different terms and rates. Choose term and rate that minimize total cost—then payment follows.
- Real monthly cost — payment + fuel + insurance + maintenance. Use autopremo.com total cost of ownership to see real monthly cost.
Bottom Line
Car payments are misleading because they hide total cost, term, and rate. Focus on OTD and total cost (principal + interest)—not payment. Use autopremo.com to see OTD and total cost so you don't overpay or overborrow.