Question

Jerry’s new car has a list price of $22,415. The sales tax in Jerry’s state is 8.75%, and he is responsible for a $1,925 vehicle licensing fee and a $79 documentation fee. Jerry plans to make a down payment of $3,000 and finance the rest at an interest rate of 10.86%, compounded monthly. If Jerry’s financing plan spans three years, what will his monthly payment be? a. $732.35 b. $959.93 c. $769.62 d. $763.89

Answer 1

Given:
New car list price: 22,415
sales tax: 8.75%
vehicle licensing fee: 1,925
documentation fee: 79
down payment: 3,000
interest rate 10.86% compounded monthly.
term: 3 years.

22,415 x 1.0875 = 24,376.31
24,676.31 + 1,925 + 79 = 26,380.31
26,380.31 - 3,000 = 23,381.31

I used an auto loan calculator to compute for the monthly payment.  But if you want to use manual calculation: use this formula:

A = P * [(r(1+r)^n)] / [(1+r)^n-1]
A = monthly payment
P = principal
r = interest rate per month (10.86%/12 months = 0.905% / 100% = 0.00905
n = number of months. (3 yrs x 12 mos = 36 months)

Answer would be: 763.89