Question

You are interested in purchasing a new automobile that costs $35,000. The dealership offers you a special financing rate of 6% APR (0.5%) per month for 48 months. Assuming that you do not make a down payment on the auto and you take the dealer's financing deal, then your monthly car payments would be closest to:

Answer 1

Monthly car payments would be closest to $822

Step-by-step explanation:

Use the following formula to calculate the monthly car payment

PV of Annuity = Annuity Payment x ( 1 - ( 1 + interest rate )^-Numbers of periods ) / Interest rates

Where

Interest rate = 0.5% per month

Numbers of periods = 48 months

PV of Annuity = $35,000

Annuity Payment = Monthly car payment = ?

Placing values in the formula

$35,000 = Monthly Payment x ( 1 - ( 1 + 0.5% )^-48 ) / 0.5%

$35,000 = Monthly Payment x 42.58031778

Monthly Payment = $35,000 / 42.58031778

Monthly Payment = $821.9760167

Monthly Payment = $821.98 ( Rounded to two decimal number )

Monthly Payment = $822 ( Rounde to dollar value )