Question

Note: Enter your answer and show all the steps that you use to solve this problem in the space provided.

You (or your parents) are debating about whether to buy a new car for $19,072.00 or a used car for $15,635.00. Sales tax is 4.5%. You (or your parents) plan to make a down payment of $1,200.00 and your credit rating is fair. What is the difference in interest accrued by the end of the first month?

Answer 1

$21.96

Explanation:

You want the difference in the first month's interest on loans of $19,072 or $15635 with $1200 down and 4.5% sales tax, if the respective interest rates are 7.55% and 7.60%.

Loan value

The principal amount of the loan is the car value with tax added, less the down payment.

Interest

That value is multiplied by the annual interest rate divided by 12 to find the firsts month's interest. The attached calculator screen shows those amounts to be

• new car: $117.84
• used car: $95.88

The difference in the first month's interest amounts is ...

$117.84 -95.88 = $21.96