The “Easy Monthly Payment?
The automobile began its process of transforming how Americans viewed mobility in the early 1900s. It was also responsible, however, for how we view the idea of credit. American consumers were primarily “cash and carry” buyers until the automobile manufacturers made monthly payments a popular way to purchase their products. As more families bought the new vehicles, the monthly car payment became a part of the average budget. An automobile payment calculator became an essential part of the auto dealer business.
The focus then, as now, was on how much the monthly payment required, not on how much the car actually cost. Of course, the interest expenses and other costs were hidden in those monthly payments. The auto industry has done a masterful job of making the car affordable on a cash flow basis, without regard to the total investment it requires.
Popular financial writer and speaker Larry Burkett is known for his discussion of the Million Dollar Car. He shows how if you just calculate monthly car payment and costs, you can end up with the equivalent of a million dollar investment and lost value. He details such ongoing costs as:
- Financing expenses
This analysis shows the cost of buying a new car every two or three years and never getting it paid off. It’s really an amazing insight into effective financial planning.
Understanding the Cost of Interest
One of our goals at Half A Payment™ is to help people get debt free. This process begins with education about the real cost of interest and how to lower that expense. We provide some tools on our website, such as a bi weekly auto loan calculator and our version of the automobile payment calculator.
We also explain that the lenders charge you interest based on your total outstanding balance each month. The way to save money on interest is to lower that balance. Unfortunately, most monthly payments go to pay primarily interest, not to reduce your balance due. That means you simply pay more interest the next month and only very slowly get your balance paid off.
The Half A Payment™ Approach
What we do with our tools such as the bi weekly auto loan calculator is show you how splitting your monthly payment in two helps lower your monthly interest costs. We also show you that if you add just a little more to each of your payments, that amount goes to lower your balance. Then, the next month, more of your payment goes to reducing the balance, not to interest charges.
Our version of the automobile payment calculator is different from the car dealer’s. Ours is designed to show you how to get your car loan paid off more quickly, not figure out how to get into more debt with a more expensive automobile. We show how to calculate monthly car payment as a part of a plan to reduce your debt, not increase it.
When you use our tool, you just input a few items such as your:
- Monthly payment,
- Current balance, and
- Interest rate.
The bi weekly auto loan calculator then shows you just how much you can save in time and money by following our concepts. People get motivated to use this approach when they see they can save hundreds or even thousands of dollars. In addition, this approach works on all your debts, from mortgages to your credit cards.