Bill is looking to purchase a $30,000 new car with 2% APR financing over 5 years. If he were to pay 20% out of pocket and finance the balance in equal monthly payments, what would be his approximate total cost of financing?

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Quizplus · Accepted Answer

The total cost of financing is the total amount of interest paid over the life of the loan. To calculate this, we need to first calculate the monthly payment. The monthly payment can be calculated using the following formula:Monthly payment = (Loan amount * APR) / (1 - (1 + APR)^(-n))where:Loan amount = $30,000APR = 2%n = 5 years * 12 months/year = 60 monthsPlugging these values into the formula, we get:Monthly payment = (30000 * 0.02) / (1 - (1 + 0.02)^(-60))= $500The total cost of financing is then the total amount of interest paid over the life of the loan, which is:Total cost of financing = (Monthly payment * n) - Loan amount= (500 * 60) - 30000= $1,200Therefore, the approximate total cost of financing is $1,200.

Bill Is Looking to Purchase a $30,000 New Car with 2