Question

Al bought a Chevy truck for $16,000. Al made a down payment of $3,000 and paid $250 monthly for 60 months.

What is the purchase price of the truck?

What is the amount financed by Al?

What is the total finance charge paid by Al?

Answer 1

(a) Purchase price of the truck is $16000. It is the actual price or cost of the truck, when it is purchased.

(b) Now, AI made the down payment of $3000. It means that $3000 was paid instantly. Remaining balance is $13000 i.e. $16000 - $3000. This remaining balance of $13000 is financed by AI.

(c) When we pay the excess amount than what we have borrowed, that excess amount is finance charge.

Finance charge = Total amount paid in monthly installments - Amount financed

Total amount paid in monthly installments = Monthly payments * No. of months

Total amount paid in monthly installments = $250 * 60 = $15000

Finance charge = Total amount paid in monthly installments - Amount financed

Finance charge = $15000 - $13000 = $2000