The Borrower is Servant to the Lender Part 2

When considering the idea of the “borrower being servant to the lender,” Let’s start with car loans. The numbers may surprise you!

The average price of a new car is about $50,000.00. Most are financed for seven years at about 4.5% interest and with sales tax of $4,465.00, you will finance about $54,465.00. The payment would be about $752.00 per month.  You will pay $9,043.00 in interest. You will pay the finance company a total of $63,168.00.

If, instead of buying a new car, you bought an older one you could pay cash for and put that same payment of $752.00 into a fund that paid about 7% interest or dividends, you would have $81,215.23 in your fund at the end of seven years. You would have deposited about $63,168.00. You would have earned about $18,047.23 in interest.

According to Dave Ramsey, it is not uncommon for many families to have two of these loans, so you could double the numbers. 

At the end of seven years, you could have $162,430.46 in your fund based on two new cars, or you could have used-up vehicles with little resale value.

You would have paid the car manufacturer and the banker, and you are left with an empty sack, even though you are the one doing all the work to make the money.

God did prosper you back; you gave it away to the banker and the car manufacturer. This is why in some cases you might find it hard to tithe and/or save any money.

These numbers may seem outrageous because, when we borrow money, they don’t show us these numbers.  No one shows us the total cost of the purchase. The seller wants us to look only at the payment and decide whether we can afford it. As someone else said, just because you can afford the payment does not mean you can afford the car. By accepting the payment, you decide to be a servant to the lender.

Learning about finance is all part of The Prosperous Life.

(Disclaimer: the numbers herein will vary depending on the calculator, down payment, interest rates, and your state.  This was presented to help you look at the big picture of debt.)