Unless I’m drunk I usually make the same capitalization error in my password on the same character every time. So it’s easy to delete that one character and hit enter.
If you edit the password with the typo version, then the typo effectively becomes the truth and you don't make a typo anymore, thus don't have to correct the typo anymore.
For me, it's usually for passwords that I have in my muscle memory. I'll typo, instinctively reach for backspace, and continue typing. As soon as I think about what I just wrote, no chance of continuing.
Of course, the password being in muscle memory also means continuing typing, even if it ends up being wrong, is basically just as fast as deleting the password.
I have a non-tactile mechanical keyboard so sometimes I fat finger a couple keys. I regularly just delete the last 2 characters I typed and redo it and it works more often than not. But it still feels anxiety inducing.