Almost cheated

WOULD like to start out by telling you a true story.

WOULD like to start out by telling you a true story.

Sipho was interested in buying a new truck. He had done his homework and knew exactly what make, model and features he wanted.

Finally he found a dealership that had the exact truck he was looking for. Now it was time to negotiate the price and financing. Sipho realised that he was not very good at numbers, so he asked his friend Phindi to come along and help him make sure he was getting a good deal.

The total cost of the truck came to about R154000.

Phindi remained quiet while the salesperson explained the financing options, checked Sipho's credit and determined an interest rate for the loan.

The salesperson said the payments on the five-year loan would be about R2940 a month.

Phindi checked the numbers and agreed with the calculations, but John was a little shocked and disappointed.

The salesperson suggested that JSipho take a six-year loan instead.

Phindi explained that this would lower the monthly payment, but Sipho would end up paying more interest because of the longer time for the loan to be paid off. Sipho wasn't too concerned about paying a little extra as long as he could afford the monthly payments.

The salesperson asked Sipho how much he could afford to pay. John indicated that he could pay up to R2625 a month.

The salesperson checked and said he was able to get the monthly payments down . All Sipho had to do was sign the papers and he could drive home in his new truck .

When Phindi asked to look at the numbers, the salesperson was a bit hesitant. He tried to change the subject, but Phindi insisted on seeing the numbers. She reviewed the numbers and did some of her own calculations and found that the monthly payment on the truck loan should have been about R2450 a month. So how did the salesperson come up with R2625 a month?

After looking at the terms of the contract a bit closer, Phindi noticed that the price of the truck was now R175000, an increase of R21000. She asked the salesperson why the price of the truck had just gone up?

Phindi and Sipho walked out of the dishonest dealership.

As excited as he was to have his new truck, Sipho was angered that the salesperson had tried to rip him off by taking advantage of his lack of understanding of how the numbers in a loan relate.

Phindi explained in basic terms how the number related and what to look for in the financing terms. She explained that there were four elements to a loan; the principal or amount you are borrowing, the interest rate, the time period and the monthly payment. 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.

The salesperson extended the time so that the payment would go down, but the payment went down further than Sipho was willing to pay. So they decided to increase the amount so the payment would match what Sipho could pay. They "forgot" to explain, however, that the price went up to make the payment hit his target. -