Question

Emile bought a car for $27,000 three years ago. The loan had a 5 year term...

Emile bought a car for $27,000 three years ago. The loan had a 5 year term at 6% interest rate, and Emile has been making monthly payments for three years. How much does he still owe on the car?

(Hint: first you will need to figure out the monthly payment on the 5 year loan.)

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Answer #1

First of all, we calculate the annual equal instalments for the car using the PMT Function of excel. Following are the inputs for the same.

521.99 is the monthly payment to be made for the car.

Now if we are in year 3, it means we have 2*12 = 24 more payments to be made in the next two years to fully payoff the car, hence to calculate the total value, if discount these 24 payments to the present to get the total o/s amount as of today.

Hence, he still owes 11,777.49 today to completely payoff the car.

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