A car dealer offers you two deals on a car that costs $14,000. Please calculate the monthly payment, given these two payment options the car dealer is offering.

Payment Option 1: You can finance the car for 60 months with no interest if you make a $2,000 down payment.

Payment Option 2: You can finance the car for 72 months (6 years) with 2% simple annual interest and no down payment. (Hint: To calculate simple annual interest, use the formula Interest = Principal * Rate * Time. Add the amount of interest to the price of the car.)

Which monthly payment amount is lower? Please explain????

Question

A car dealer offers you two deals on a car that costs $14,000. Please calculate the monthly payment, given these two payment options the car dealer is offering.

Payment Option 1: You can finance the car for 60 months with no interest if you make a $2,000 down payment.

Payment Option 2: You can finance the car for 72 months (6 years) with 2% simple annual interest and no down payment. (Hint: To calculate simple annual interest, use the formula Interest = Principal * Rate * Time. Add the amount of interest to the price of the car.)

Which monthly payment amount is lower? Please explain????

anonymous · Answer

Please help???

anonymous · Answer

first payment is easy enough to calculate yes?

anonymous · Answer

you put 2,000 down on a car that cost 14,000 leaving a balance of 12,000 over 60 months with no interest  and $12,000\div 60 = 200$ so you pay $200 per month

anonymous · Answer

second part is unfortunately nonsense, because payments do not work this way at all, but i guess we can compute what they want

anonymous · Answer

$$14,000\times .02\times 6=1680$$ add this to 14000 and get 15,680
then divide by 72 to get your answer

anonymous · Answer

gently tell your teacher that interest payments to not work in this fashion
the formula for payments on loans with a given interest rate and time is much more complicated