Chapter $7$

Financial Planning Exercise $10$

Calculating payments, interest, and APR on auto loans

After careful comparison shopping, Hayden Burch decides to buy a new Toyota Camry. With some options added, the car has a price of $\backslash (\backslash$$ $33,092\backslash )-$ including plates and taxes. Because he can't afford to pay cash for the car, he will use some savings and his old car as a trade$-$in to put down $\backslash$$$9,092.$ Hayden plans to finance the rest with a $\backslash (\backslash$$ $24,000,60\backslash )-$month loan at a simple interest rate of $5$ percent.

a$.$ What will his monthly payments be$?$ Round the answer to the nearest cent.

$\backslash$$ per month

b$.$ How much total interest will Hayden pay in the first year of the loan? Round the answer to the nearest cent. $($Use a monthly payment analysis procedure similar to the one in Exhibit $7\mathrm{.}7.)\backslash$$

c$.$ How much interest will Hayden pay over the full $(60-$month$)$ life of the loan? Round the answer to the nearest cent. $\backslash$$

d$.$ What is the APR on this loan? Round the answer to $2$ decimal places.

Part of each monthly payment on an installment loan goes to interest and part to principal. As the loan is paid down over time, less and less of each payment goes to interest and more and more goes to principal.