# Beware the monthly payment math trick

## You need to figure out your total cost first.

By Karen Datko Oct 18, 2009 5:27PM

This post comes from partner blog Blueprint for Financial Prosperity.

If you've ever tried to buy a car or a house, you've probably faced the monthly payment math trick. It's a psychological trick salespeople use to get you to buy something you couldn't afford or to pay an amount you weren't originally comfortable with.

A salesperson will try to convince you to purchase something based on the monthly payment you'll have to make. It frames the purchase in a way that lets you begin integrating the purchase into your life, before you've actually made it, and may even make it more likely you'll make the purchase.

Here's an example: Let's say you want to buy a car and you are looking to spend \$12,000. You begin looking around and find a nice used car for \$12,000. You figure you can get a loan at 6% for four years on the \$12,000 and walk out of there paying \$281.82 a month and feeling pretty good.

That's when the salesperson says: "Why not get the next model up? For the same monthly payment, we can restructure your loan so that you keep that \$281.82 a month, except we stretch it out only two more years." Wow, not a bad deal, right?

You think to yourself, "That is a nice car. I can afford \$281.82 a month. Why not?"

The "why not" is because your total original cost was \$13,527.36. The total cost of the higher model is \$20,291.04, a staggering difference of \$6,763.68. While the total cost increased, your monthly amount remained the same.

Don't fall into the monthly payment math trap.

Other articles of interest at Blueprint for Financial Prosperity:

Published July 15, 2008
 Tags: billscar shoppingloansspending

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