Everyone wants a low monthly payment. That's natural. But here's what happens when you optimize only for that number: you lose equity.

Low payments are often achieved through tactics that push your equity further away. Understanding how this works helps you avoid the trap.

How Low Payments Are Achieved

There are three main ways dealers and lenders create low monthly payments:

Long terms: A 72-month loan spreads the cost over more months, so the payment looks lower. But you're paying interest longer and building equity slower. By month 36, you might still owe more than the car is worth.

Inflated residuals: In leasing, setting a high residual value (say, 70% instead of 60%) makes your payment lower because you're paying less depreciation. But if the car is only worth 58% at lease end, you're underwater. You either pay the difference or walk away with negative equity.

Front-loaded rebates: Manufacturers offer rebates that get folded into the deal structure. These can lower your payment, but they're often built into the residual calculation or financing structure in ways that don't actually improve your ownership outcome.

The Equity Problem

When you focus only on monthly payment, you're not tracking your equity position. Here's what happens:

A $350/month payment on a 72-month loan sounds better than a $420/month payment on a 48-month loan. But after 24 months, the person with the shorter term has built more equity. They have options: they can trade in with positive equity, refinance, or pay it off early without penalty.

The person with the long term? They're still underwater. They're trapped in the loan. They can't trade without rolling negative equity into the next deal, which makes that deal worse.

What This Means for You

I don't structure deals around monthly payment. I structure them around equity position, total cost of ownership, and your ability to build wealth through the asset. That's how you avoid the trap and actually come out ahead.

Why Structure Matters More

The monthly payment is just one number. What actually matters is:

  • Your equity position over time
  • Total interest paid over the life of the loan
  • Your ability to exit the deal without penalty
  • Whether the car will be worth more than you owe when you want to trade

The reality: A deal with a higher monthly payment but better equity structure can actually save you thousands over time. You just have to look beyond the monthly number.

How to Think About It

Instead of asking "What's the lowest payment?", ask:

  • What will I owe in 24 months?
  • What will the car be worth at that point?
  • What's my total cost of ownership over the term?
  • Can I exit this deal early without penalty?

When you structure around these questions, you build equity. When you structure around monthly payment only, you lose it.

Bottom Line

Low monthly payments aren't inherently bad. But when they're achieved through long terms, inflated residuals, or other tactics that hurt your equity, you're trading short-term affordability for long-term financial position. I structure deals differently: I optimize for equity, ownership outcome, and your ability to build wealth—not just the monthly number.