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Practice Problem # 1
You have found your dream car. The cost is $25,000. You will be financing for 5 years and will be charged 3.5% sales tax.
Use the car loan calculator to find the information below. There is no trade-in or down payment.
| Bank | Interest Rate | Monthly Payment | Total Cost of Finance Charges |
|---|---|---|---|
| A | 4.42% | ? | ? |
| B | 4.92% | ? | ? |
| C | 3.92% | ? | ? |
Answer:
| Bank | Interest Rate | Monthly Payment | Total Cost of Finance Charges |
|---|---|---|---|
| A | 4.42% | $481.45 | $3,011.85 |
| B | 4.92% | $487.35 | $3,365.72 |
| C | 3.92% | $475.59 | $2,660.64 |
Answer the following questions using the information from the chart above.
- What is the difference in the monthly payment for Bank B and Bank C?
Answer: $11.76 - What is the difference in the total cost of financing Bank B and Bank C?
Answer: $705.08
You can look at this as saving $705.08 by choosing Bank C or as spending an extra $705.08 on the car by choosing Bank B.