Do you charge interest on the cash price or on the financed price?

Question

Accepted Answer

On neither one exactly: interest is charged on the balance you finance, which is the financed price minus your down payment. The financed price is 20% above the cash price shown on the listing, and your down payment is 5%, 10% or 20% of that financed price. Take a tract with a cash price of $100,000: the financed price is $120,000, a 5% down payment is $6,000, and the fixed 10% annual interest applies to the $114,000 balance over the term you choose, 10 or 15 years. If you pay cash, you pay the listed price and there is no interest at all.