Question

You are about to purchase a new car, which will cost you $18,000 after taxes and fees. You are planning to pay a $3,000 down payment and then take out a five-year auto loan at an APR of 4.8%. You will make a monthly payment for the next five years starting a month from today. How much is your loan payment each month? $220.81 $280.57 $338.04 $221.70 $281.70

Answer 1

Given,

Cost of car = $18000

Down payment = $3000

APR = 4.8% or 0.048

No. of years = 5 years

Solution :-

Loan amount = Cost of car - down payment

= $18000 - $3000 = $15000

Monthly rate (r) = 0.048/12 = 0.004

No. of months (n) = 5 years x 12 = 60 months

Loan payment each month = (Loan payment x r) [1 - (1 + r)^-n]

= ($15000 x 0.004) [1 - (1 + 0.004)^-60]

= $60 [1 - (1.004)^-60]

= $60 [1 - 0.7870045287]

= $60 0.2129954713 = $281.70

Thus, your loan payment each month is $281.70