Question

If the dealership you are buying the car from is offering 6.3% interest on a 5 year loan, what will your monthly payment be? How am I able to solve this when the selling price is $56,937.

Answer 1

Explanation:

To calculate the monthly payment on a loan, you can use the formula for the monthly payment on an annuity: P = (r * PV) / (1 - (1 + r)^(-n)), where P is the monthly payment, r is the monthly interest rate, PV is the present value of the loan (i.e., the amount borrowed), and n is the total number of monthly payments.

In this case, the amount borrowed is $56,937 and the interest rate is 6.3% per year. To convert this to a monthly interest rate, we divide by 12: r = 0.063 / 12 = 0.00525. The loan term is 5 years, so the total number of monthly payments is n = 5 * 12 = 60.

Substituting these values into our formula for the monthly payment, we get: P = (0.00525 * 56937) / (1 - (1 + 0.00525)^(-60)) ≈ $1102.53. So, the monthly payment on this loan would be approximately $1102.53.