A comfortable monthly payment hides what a loan really costs — watch each payment split into interest and principal, month by month.
See why the monthly payment is the wrong thing to shop for: a longer term makes each payment smaller and the loan far more expensive, while one extra payment a year cuts both the payoff time and the total interest.
Keep the $12,000 car and 9% APR, and drag the term out to 10 years. Watch the monthly payment, then the total interest.
Before you act, predict what will happen. The payment got smaller — what happened to the share of the sticker price you pay in interest, and why? Then do it — did your prediction match what happened?
Where each payment goes
The same payment every month — but early on most of it is interest, and only later does it start buying the thing.
Total interest, three ways
What the same purchase costs in interest under your loan, a shorter term, and one extra payment a year.