When most people buy cars, the sticker price is only part of the cost. The other part involves the loan, since folks usually borrow money for auto purchases. Therefore the interest rate, monthly payment size, and total repayment cost all matter too. And yet, on aggregate, people do more comparison shopping about car prices than about lenders, and they frequently settle for relatively expensive loans. What happens when the financing costs more' The answer is, people buy older cars with lower sticker prices. 'The car they're driving right now could be a year older because of that,' says Christopher Palmer PhD '14, an associate professor of finance at the MIT Sloan School of Management, who helped discover this phenomenon through a study examining millions of U.S. car loans. That research is like much of Palmer's work: grounded in hard data and shining new light on issues, even familiar ones, about personal money management. It sure does. Palmer, often working with co-authors, has also...
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