SOLUTION: Darla purchased a new car during a special sales promotion by the manufacturer. She secured a loan from the manufacturer in the amount of $23,000 at a rate of 4.3%/year compounded
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Question 1192975: Darla purchased a new car during a special sales promotion by the manufacturer. She secured a loan from the manufacturer in the amount of $23,000 at a rate of 4.3%/year compounded monthly. Her bank is now charging 6.9%/year compounded monthly for new car loans. Assuming that each loan would be amortized by 36 equal monthly installments, determine the amount of interest she would have paid at the end of 3 years for each loan. How much less will she have paid in interest payments over the life of the loan by borrowing from the manufacturer instead of her bank? (Round your answers to the nearest cent.)
interest paid to manufacturer $
interest paid to bank $
savings $
You can put this solution on YOUR website! the monthly payment at the end of each month for the loan at 4.3% per year compounded monthly is 682.13.
the monthly payment at the end of each month for the loan at 6.9% per year compounded monthly is 709.12.
the calculator i used is at https://arachnoid.com/finance/index.html
inputs are everything except pmt.
output is pmt.
first display is at 4.3% per year compounded monthly.
second display is at 6.9% per year compounded monthly.
total interest on the 4.3% loan is 36 * 682.13 - 23000 = 1556.68.
total interest on the 6.9% loan is 36 * 709.12 - 23000 = 2528.32
difference is 971.64.
your solution is that she would have saved 971.64 in total interest if she took the manufacturer's loan instead of the bank's loan.
