You are selling your car for $6,000. A potential buyer says, “I will pay you $1,000 now for the car and pay off the rest at 12% interest with monthly payments for 3 years. Let’s see . . . 12% of the $5,000 is $600 and $5,600 divided by 36 months is $155.56, but I’ll pay you $160 per month for the trouble of carrying the loan. Is it a deal?”

If this deal sounds fair to you, I have a perfectly lovely bridge I think you should consider as your next purchase. If not, explain why the deal is fishy and compute a fair monthly payment (assuming you still plan to amortize the debt of $5,000 over 3 years at 12%).