Finance charge: $839,000 for a $950,000 purchase with a $72,000 down payment and $650 monthly payments for 60 months.
To compute the total finance charge for the purchase, we'll first determine the total amount paid over the 60 months. The formula for calculating the total amount paid involves the monthly payment, the number of payments, and the down payment.
The total amount paid can be calculated using the formula:
Total amount paid = (Monthly payment × Number of payments) + Down payment
Given:
Monthly payment = $650
Number of payments = 60
Down payment = $72,000
Total amount paid = (650 × 60) + 72,000
Total amount paid = 39,000 + 72,000
Total amount paid = $111,000
Now, to determine the finance charge, subtract the total amount paid from the initial cost of the purchase:
Initial cost of purchase = $950,000
Total amount paid = $111,000
Finance charge = Initial cost of purchase - Total amount paid
Finance charge = $950,000 - $111,000
Finance charge = $839,000
Therefore, the total finance charge for purchasing the item under the provided terms and payments would be $839,000. This amount represents the total cost paid for financing the purchase over the 60 months, considering the down payment and monthly installments.
Question:
To calculate the total finance charge for a purchase of $950,000 with a down payment of $72,000 and monthly payments of $650 for 60 months, determine the total amount paid and then find the finance charge. Provide the solution for the total finance charge in the given scenario.