Financing Loans for Vehicle Purchases and Leases - Part 2
Completion requirements
Unit F: Finance
Financing Loans for Vehicle Purchases and Leases
Gavin purchases a used truck for $8 000.00. The interest rate of the loan is 10% and Gavin plans to make payments of $250.00 per month.
- How many payments are needed for Gavin to pay off the truck?
- How long will it take Gavin to pay off the loan? Express the answer in years.
- Record the information in a chart.
principal 8 000.00 annual interest rate 10 monthly payment 250.00
Now enter these values in to Number of Monthly Payments Calculator. Click
to find the number of monthly payments.
There will be 38 payments. - To find the length of time to pay off the loan, convert 38 months to years.
«math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mn»38«/mn»«mo»§#160;«/mo»«mi»months«/mi»«mo»§#215;«/mo»«mfrac»«mrow»«mn»1«/mn»«mo»§#160;«/mo»«mi»year«/mi»«/mrow»«mrow»«mn»12«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/mrow»«/mfrac»«mo»=«/mo»«mn»3«/mn»«mo».«/mo»«mn»17«/mn»«mo»§#160;«/mo»«mi»years«/mi»«/math»
Gavin will pay off the truck in 3.17 years.
Use the Monthly Payment Calculator to determine the monthly payment for a $20 000.00 loan to be paid back over 4 years with an annual interest rate of 7.5%.
To use the Monthly Payment Calculator, the principal, annual interest rate, and number of monthly payments must be known.
Substitute the values from the chart into the Monthly Payment Calculator and then click
to find the monthly payment.
The monthly payment is $483.58.
| principal | 20 000.00 |
| annual interest rate |
7.5 |
| number of monthly payments |
«math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mn»4«/mn»«mo»§#160;«/mo»«mi»years«/mi»«mo»§#215;«/mo»«mfrac»«mrow»«mn»12«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/mrow»«mrow»«mn»1«/mn»«mo»§#160;«/mo»«mi»year«/mi»«/mrow»«/mfrac»«mo»=«/mo»«mn»48«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/math» |
Substitute the values from the chart into the Monthly Payment Calculator and then click
to find the monthly payment.The monthly payment is $483.58.
Carmine purchased a car that cost $22 568.00 before GST. Carmine receives a car loan for 6 years at an interest rate of 6%.
- What is the price of the car including GST?
- Calculate Carmine's monthly payment.
- Calculate the total amount that Carmine pays for the car.
- Calculate the amount of interest that Carmine will pay.
- What is the value of the car loan that Carmine must obtain in order to finance his car if he makes a down payment of $5 000.00?
- Calculate Carmine's monthly payment if he made a down payment of $5 000.00 towards the purchase of the car.
- What is the total amount that Carmine paid for the car?
- How much interest did Carmine pay for the car loan?
- How much money did Carmine save by making a down payment of $5 000.00?
- The total price can be found by multiplying the price of the car by the GST of 5% and then adding that amount to the price. A simpler way to calculate the total price is to multiply the price by 1.05.
$22 268 × 1.05 = $23 381.40
The total price of the car is $23 381.40. - Record the information in a chart.
principal 23 381.40 annual interest rate 6 number of monthly payments «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mn»6«/mn»«mo»§#160;«/mo»«mi»years«/mi»«mo»§#215;«/mo»«mfrac»«mrow»«mn»12«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/mrow»«mrow»«mn»1«/mn»«mo»§#160;«/mo»«mi»year«/mi»«/mrow»«/mfrac»«mo»=«/mo»«mn»72«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/math»
Substitute the values from the chart into the Monthly Payment Calculator and then click to find the monthly payment.
Carmine's monthly payment is $387.50. - To find the total amount Carmine pays for the car, multiply the monthly payment by the number of monthly payments. The total amount that Carmine pays for the car loan is
«math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mtable columnspacing=¨0px¨ columnalign=¨right center left¨»«mtr»«mtd»«mi»total«/mi»«mo»§#160;«/mo»«mi»cost«/mi»«mo»§#160;«/mo»«mi»of«/mi»«mo»§#160;«/mo»«mi»car«/mi»«mo»§#160;«/mo»«mi»loan«/mi»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mi»montly«/mi»«mo»§#160;«/mo»«mi»payment«/mi»«mo»§#215;«/mo»«mi»number«/mi»«mo»§#160;«/mo»«mi»of«/mi»«mo»§#160;«/mo»«mi»monthly«/mi»«mo»§#160;«/mo»«mi»payments«/mi»«/mtd»«/mtr»«mtr»«mtd»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mo»$«/mo»«mn»387«/mn»«mo».«/mo»«mn»50«/mn»«mo»/«/mo»«mi»month«/mi»«mo»§#215;«/mo»«mn»72«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/mtd»«/mtr»«mtr»«mtd»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mo»$«/mo»«mn»27«/mn»«mo»§#160;«/mo»«mn»900«/mn»«mo».«/mo»«mn»00«/mn»«/mtd»«/mtr»«/mtable»«/math»
Carmine pays $27 900.00 for the car. - In a loan, the interest is the amount of money paid above the original price of the vehicle.
«math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mtable columnspacing=¨0px¨ columnalign=¨right center left¨»«mtr»«mtd»«mi»interest«/mi»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mi»total«/mi»«mo»§#160;«/mo»«mi»amount«/mi»«mo»§#160;«/mo»«mi»paid«/mi»«mo»§#160;«/mo»«mi»for«/mi»«mo»§#160;«/mo»«mi»car«/mi»«mo»-«/mo»«mi»initial«/mi»«mo»§#160;«/mo»«mi»cost«/mi»«mo»§#160;«/mo»«mi»of«/mi»«mo»§#160;«/mo»«mi»car«/mi»«/mtd»«/mtr»«mtr»«mtd»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mo»$«/mo»«mn»27«/mn»«mo»§#160;«/mo»«mn»900«/mn»«mo».«/mo»«mn»00«/mn»«mo»-«/mo»«mo»$«/mo»«mn»23«/mn»«mo»§#160;«/mo»«mn»281«/mn»«mo».«/mo»«mn»40«/mn»«/mtd»«/mtr»«mtr»«mtd»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mo»$«/mo»«mn»4«/mn»«mo»§#160;«/mo»«mn»581«/mn»«mo».«/mo»«mn»60«/mn»«/mtd»«/mtr»«/mtable»«/math»
Carmine will pay $4 581.60 in interest for the car loan. - The car loan that Carmine needs is the total price of the car less the down payment.
$23 381.40 – $5 000.00 = $18 381.40
Carmine will need a loan of $18 381.40. - Record the information in a chart.
principal 18 381.40 annual interest rate 6 number of monthly payments «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mn»6«/mn»«mo»§#160;«/mo»«mi»years«/mi»«mo»§#215;«/mo»«mfrac»«mrow»«mn»12«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/mrow»«mrow»«mn»1«/mn»«mo»§#160;«/mo»«mi»year«/mi»«/mrow»«/mfrac»«mo»=«/mo»«mn»72«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/math»
Substitute the values from the chart into the Monthly Payment Calculator and then click to find the monthly payment.
If Carmine makes a $5 000.00 down payment, his monthly payment is $304.63. - The total amount that Carmine paid for the car is equal to the sum of the down payment and the amount of the car loan.
«math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mtable columnspacing=¨0px¨ columnalign=¨right center left¨»«mtr»«mtd»«mi»total«/mi»«mo»§#160;«/mo»«mi»amount«/mi»«mo»§#160;«/mo»«mi»paid«/mi»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mi»down«/mi»«mo»§#160;«/mo»«mi»payment«/mi»«mo»+«/mo»«mi»car«/mi»«mo»§#160;«/mo»«mi»loan«/mi»«/mtd»«/mtr»«mtr»«mtd»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mo»$«/mo»«mn»5«/mn»«mo»§#160;«/mo»«mn»000«/mn»«mo».«/mo»«mn»00«/mn»«mo»+«/mo»«mfenced»«mrow»«mo»$«/mo»«mn»304«/mn»«mo».«/mo»«mn»63«/mn»«mo»/«/mo»«mi»month«/mi»«mo»§#215;«/mo»«mn»72«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/mrow»«/mfenced»«/mtd»«/mtr»«mtr»«mtd»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mo»$«/mo»«mn»5«/mn»«mo»§#160;«/mo»«mn»000«/mn»«mo».«/mo»«mn»00«/mn»«mo»+«/mo»«mo»$«/mo»«mn»21«/mn»«mo»§#160;«/mo»«mn»933«/mn»«mo».«/mo»«mn»36«/mn»«/mtd»«/mtr»«mtr»«mtd»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mo»$«/mo»«mn»26«/mn»«mo»§#160;«/mo»«mn»933«/mn»«mo».«/mo»«mn»36«/mn»«/mtd»«/mtr»«/mtable»«/math» - To find the interest, subtract the initial cost of the car from the total amount paid for the car.
«math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mtable columnspacing=¨0px¨ columnalign=¨right center left¨»«mtr»«mtd»«mi»interest«/mi»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mi»total«/mi»«mo»§#160;«/mo»«mi»cost«/mi»«mo»§#160;«/mo»«mi»of«/mi»«mo»§#160;«/mo»«mi»loan«/mi»«mo»-«/mo»«mi»initial«/mi»«mo»§#160;«/mo»«mi»cost«/mi»«mo»§#160;«/mo»«mi»of«/mi»«mo»§#160;«/mo»«mi»loan«/mi»«/mtd»«/mtr»«mtr»«mtd»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mo»$«/mo»«mn»26«/mn»«mo»§#160;«/mo»«mn»933«/mn»«mo».«/mo»«mn»36«/mn»«mo»-«/mo»«mo»$«/mo»«mn»23«/mn»«mo»§#160;«/mo»«mn»381«/mn»«mo».«/mo»«mn»40«/mn»«/mtd»«/mtr»«mtr»«mtd»«/mtd»«mtd»«mo»=«/mo»«/mtd»«mtd»«mo»$«/mo»«mn»3«/mn»«mo»§#160;«/mo»«mn»551«/mn»«mo».«/mo»«mn»96«/mn»«/mtd»«/mtr»«/mtable»«/math»
Carmine paid $3 551.96 in interest on the car loan. - The difference between the interest amounts needs to be calculated (use the values found in part d and part h above).
$27 900.00 – $26 933.36 = $966.64
Carmine saved $966.64 in interest by making a down payment of $5 000.00.