Interest, credit and the cost of borrowing
Simple interest is I = Prt on the original amount. Compound interest grows the whole balance each period.
A worked example
$1 200 at 6% for 4 years: simple interest gives 1200 x 0.06 x 4 = $288; compounded it gives 1200(1.06)⁴ − 1200 = $314.97.
The mistake people actually make
A low monthly payment is not a low total cost. Multiply the payment by the number of payments before comparing options.