THIS is a true story.
John wanted to buy a truck. He had done his homework and finally found a dealership that had what he was looking for.
Now it was time to negotiate the price and financing. John realised he was not very good at figures so he asked his friend Cindy to help him make sure he was getting a good deal.
The salesperson said the total cost would be R500000. He said the payments on the five-year loan would be about R10416 a month. Cindy checked the figures and agreed with the calculations. But John was a little shocked and disappointed.
Seeing his expression, the salesperson said that they could lower the payment on a six-year loan instead.
John looked to Cindy, who said that this would lower the monthly payment, but John would end up paying more interest because it would take longer to pay the loan off. John wasn't too concerned about paying a little extra as long as he could afford the monthly payments.
The salesperson asked John how much he could afford to pay each month. John indicated he could pay up to R8680.
All John had to do now was sign the papers . But Cindy was curious. She asked to look at the figures , but the salesperson was a bit hesitant. He tried to change the subject , but Cindy insisted on seeing the figures. She did some of her own calculations and found that the monthly payment on the loan should have been less.
So how did the salesperson come up with his figure? After looking at the terms of the contract a bit closer, Cindy noticed that he had inflated the price. She asked the salesperson why the price of the truck had suddenly gone up? After trying to dodge the question and then blaming it on a mistake by the "finance department", Cindy and John walked out of the dishonest dealership.
Cindy explained that there are four elements to a loan: the principal or amount you are borrowing, the interest rate, the time period and the monthly payment.
And the figures relate like this: If the amount goes up the payment goes up. If the interest rate goes up the payment goes up. If the time goes up the payment goes down. So in this case, they extended the time so that the payment would go down. But the payment went down further than what John was willing to pay. So they decided to increase the amount so that the payment would match what he said he could pay.
But they "forgot" to explain that the price went up to make the payment hit John's target.
John found a truck at a different dealership, brought Cindy along to help make sure he was getting a good deal and then took her out to dinner.