You are considering buying a new car. The sticker price is $15,000 and you have $2,000 to put toward a down payment. If you can negotiate a nominal annual interest rate of 10% and you wish to pay for the car over a 5-year period, what are your monthly car payments?

Question

Quizplus · Accepted Answer

The loan amount is $13,000 ($15,000 - $2,000). Using the formula for monthly payments on an amortizing loan: P = [r*PV] / [1 - (1 + r)^-n], where r is the monthly interest rate (0.10/12), PV is the present value ($13,000), and n is the total number of payments (60), the monthly payment is approximately $276.21.

You Are Considering Buying a New Car