Question

Suppose that you decide to purchase a new car. You go to a credit union to ge preapproved for your loan. The credit union offers you an annual interest rate of 3.25% for 3 years. The purchase price of the car you select is $28,450, including taxes, and you make a 20% down payment. What is your monthly payment?

Answer 1

Answer: $664/month

Explanation:

Annual interest rate = 3.25% = 0.0325

Monthly interest rate = 0.0027083

Period = 3years = 36 months

Price of car = $28,450

Down payment = 20%

Down payment = 0.2 × $28,450

Down payment = $5,690

Loan amount = $(28,450 - 5690) = $22,760

Using the car loan calculator :

The monthly payment on the car is $664

OR

Monthly payment = (monthly interest rate × loan amount) ÷ 1 - (1 + monthly interest rate)^-period

0.0027083 * $22760 / 1 - ( 1.0027083 ) ^-36

= $61.6417 / 0.09277

= $664.46

Answer 2

Answer: $664.480

Explanation:

Given Data:

r = 3.25%

T = 3years = 36months

Purchase price of car = $28,450

Down payment made = 20%

Therefore;

1. Down payment = 20% of car purchase price

= 0.2 * $28,450

= $5,690

2. Remaining cost = original cot - down payment

= $28,450 - $5690

= $22,760

Monthly payment

Where i = r/t

n = 36

r = 0.0325/12 = 0.002708

M = 0.002708 * $22760 / 1 - ( 1 + 0.002708 ) ^-36

M = $61.642 / 0.09277

M = $664.480