Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000 but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local bank requires him to put down 10% of the purchase price after the value of the trade-in is considered. Mark also knows that bank will charge 8% for the loan and require monthly payments over the next 4 years. Mark's monthly payments are 353.50 per month. What is Mark's total finance charge if he takes the full 4 years to pay off the loan

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Business

Tristan Patterson

25 July, 18:28

Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000 but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local bank requires him to put down 10% of the purchase price after the value of the trade-in is considered. Mark also knows that bank will charge 8% for the loan and require monthly payments over the next 4 years. Mark's monthly payments are 353.50 per month. What is Mark's total finance charge if he takes the full 4 years to pay off the loan

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Fisher · Answer 1

The finance charge is $2,118

Explanation:

The fund that Mark is going to fund through loan = $21000 - $4500

= $16,500

This means that the total finance that the bank requires is $4500 plus ten percent of $16500.

Which is:

Down payment = $4500 + $16,500*10% = $6150

The interest would be charged on the remainder amount = $21,000 - $6150 = $14,850

The total interest paid over four year period = $353.5 * 12 months * 4 years

= $16,968

The net difference is the interest paid which is:

Interest Paid / Finance Charge = $16,968 - $14,850 = $2118