Question

You are considering buying a new, $15,000 car, and you have $2,000 to put toward a down payment. If you can negotiate an interest rate of 12% and finance the car over 60 months, what are your monthly car payments?

Answer 1

Formula for EMI is:

EMI = P × r × (1 + r)ⁿ /{(1 + r)ⁿ - 1 }

Where,

P = Principal= $ 15,000 - $ 2,000 = $ 13,000

r = rate of interest = 12 % p.a. or 0.12/12 = 0.01 p.m.

n = No. of periods = 60 months

EMI = $ 13,000 x 0.01 x (1 + 0.01)⁶⁰ / {(1+ 0.01) ⁶⁰ -1}

        = $ 13,000 x 0.01 x (1.01)⁶⁰ / {(1.01) ⁶⁰ -1}

        = $ 13,000 x 0.01 x 1.816697/ (1.816697 -1)

        = $ 13,000 x 0.01 x 1.816697/ 0.816697

        = $ 13,000 x 0.01 x 2.224445

        = $ 289.1778 or $ 289.18

Monthly car payments is $ 289.18