Among all the models on the lot, you found a great car. After all taxes and fees

Question

Among all the models on the lot, you found a great car. After all taxes and fees are included, the final cost of the car is $24,035.

The dealership offers you 0% financing for the first 3 years, with 6% APR compounded monthly for the final 2 years.

Note: The first three years are interest free, and by the end of the three years, that original $24K is seriously reduced. At that point, the interest kicks in on the BALANCE, not on the original selling price of $24K.

Use the amortization formula to find the answer.

A = payment Amount per period

P = initial Principal (loan amount)

r = interest rate per period

n = total number of payments or periods

Explanation / Answer

Monthly payment for the first three years=$400.583

Monthly payments for the next two years inclusive of interest=$426.1072

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