Question

A college student is buying a used car for $10,000. The student can either pay in full with cash from savings, or finance the car for 60 months at a monthly compounding interest rate of 5.25%, which results in a monthly payment of $216.57. How much more is paid over the life of the loan versus paying in cash?

Answer 1

If the car is financed, the total amount paid will be $216.57 x 60 = $12,994.20

Subtract the amount of the car to find how much more will be paid

$12,994.20 - $10,000 = $2,994.20