Question

April decided to purchase a $12,000 MSRP vehicle at a 5% interest rate for 4 years. The dealership offered her a $1500 cash-back incentive, which she accepted. If she takes all these factors into consideration, what monthly payment amount can she expect?

Answer 1

10,500÷((1−(1+0.05÷12)^(−12×4))÷(0.05
÷12))=241.81

Answer 2

She can expect the monthly payment of $ 241.81 ( approx )

Explanation:

Since,

The original price of the vehicle = $ 12,000

After getting $1500 cash-back incentive,

The price of the vehicle, P.V. = $ 12,000 - $ 1,500 = $ 1,050,

Now, the annual rate = 5 % = 0.05,

⇒ The monthly rate, r =
`(0.05)/(12)`,

Time = 4 years,

⇒ Number of months, n = 4×12 = 48 ( 1 year = 12 months )

Now, the monthly payment would be,

`P=(P.V.(r))/(1-(1+r)^(-n))`

`=(10500((5)/(1200)))/(1-(1+(5)/(1200))^(-48))`

`=\$241.807582492\approx \$ 241.81`

Hence, she can expect the monthly payment of $ 241.81.