Question

Emma wants to buy a car. They have $3,200 in trade-in value from their old car to use as a down payment. They have been approved for a 6-year loan at a 6.6% interest rate. The maximum they want to spend each month is $560 and they expect $160 per month in taxes, insurance, fees, and maintenance. What is the most they can afford to pay for their next car?

Answer 1

Emma can spend $400 per month on car payments after other expenses. To find the maximum car price, she needs to calculate the loan amount she can afford with a $400 monthly payment and a 6.6% interest rate over 6 years, then add her trade-in value.

Step-by-step explanation:

Emma is looking to buy a car and needs to calculate the maximum price she can afford, considering her trade-in value, loan terms, and budget for monthly expenses. To determine this, we first calculate the amount available for the car payment by subtracting the estimated monthly costs for taxes, insurance, fees, and maintenance from the maximum she can spend each month.

This means Emma can use $560 - $160 = $400 per month for her car payment. Next, we use a loan calculator or an amortization formula to determine the maximum loan amount Emma can afford with a $400 monthly payment, a 6.6% annual interest rate, and a term of 6 years. Finally, we add the trade-in value to this amount to find the total price she can pay for the car. However, without performing the actual calculations and just providing the approach, Emma would need to use an online loan calculator or consult with a financial expert to get the precise figures.