Question

A car dealer offers you two deals on a car that costs $16,000.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 $1,000 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.)

Answer 1

Which monthly payment amount is lower? Please explain how you arrived at your answer and show all of your work.

Where do I even start in this? It's so overwhelming...

Answer 2

@bakonloverk

Answer 3

its confusing me too

Answer 4

LOL I broke @bakonloverk

Answer 5

lol theres too many...words

Answer 6

i know how to do it, i just dont know where to start

Answer 7

^^^ It's alright lol. How many people does it take to answer this question we will never know... call reinforcements. lol

Answer 8

lol @Notamathgenius

Answer 9

@amistre64

Answer 10

well, no interest and 1000 down

what is: (16000 - 1000), divided by 60 ?

Answer 11

2% simple interest a year amounts to 16000*.02/12 each month for 72 months

Answer 12

16000-1000 is 15000. divided by 60 that is 250

Answer 13

then for option 1, you are paying 250 a month

Answer 14

and you got that from a formula correct?

Answer 15

i believe so. no interest just means you are paying off the amount of the loan itself

since you make a 1000 downpayment, you are only borrowing 15000 over the course of 60 months.

250 a month will payback the loan

Answer 16

now, simple interest for 72 months is 6 years of interest

16000 * .02 * 6 is the amount if interest you would have to pay for option 2

(16000 + interest)/72 would be the payments for option 2

Answer 17

for 16000 * .02 * 6 I got 19,200 Is that right?

Answer 18

thats the total amount of interest for 6 years yes

add that to the amount of the loan to get the total amount to be paid in 6 years

Answer 19

16,000+19,200= 35,200. Then divide that by 72 is apparently, 488.888889 But I'm guessing I will need to round.

Answer 20

248.888888 , but yes

we could also look at this from:

interest paid per month + principal paid per month\[16000(\frac{.02}{12})+16000\frac{1}{72}\]
\[16000(\frac{.02}{12}+\frac{1}{72})\]
\[16000(\frac{.12+1}{72})\]
\[16000(\frac{1.12}{72})\]

Answer 21

16000+16000*.02*6 = 17920

17920/72 = 248.888888

http://www.wolframalpha.com/input/?i=%2816000%2B16000*.02*6%29%2F72

Answer 22

i see its 1920, NOT 19,200

your interest was over calculated the first time

Answer 23

http://www.wolframalpha.com/input/?i=16000*.02*6

Answer 24

OH. See that]s probably why I got a totally different answer from what your showing me here, I understand what I did xD

Answer 25

:)

so option 1 = 250 a mnth
option 2 = 249 a mnth

Answer 26

So option 2 is lower :3 Thanks a lot! Really did help...

Answer 27

good luck ;)

Answer 28

Thanks a lot :D