Question

Stephanie, a student would like to buy a reliable car. She has found a silver 2014 Toyota, Corolla for $15,000 at Michael Toyota in Fresno and a white 2015 Honda, Civic for $14,500 at Clawson Honda. The Corolla has 30,000 miles while the Civic has 40,000 miles. Michael Toyota offers her a 4.1% interest rate for 48 months, while Clawson Honda offers her 4.2% interest for 48 months. Whichever car she chooses to buy, she will pay taxes on it at 7.8%, smog fee of $50 and administrative fee of $250. If she has $2,000 to put as down payment, please answer the following questions to help her decide which car to buy.

1. How much is the total cost of each car, including taxes, smog fee, and administrative fee?

Answer 1

Cost of the Toyota Corolla -

Smog and Administrative Fee = 50 + 250 = $300

Tax = 7.8% of 15000 = $1,170

Downpayment = $2,000

Balance = 15000 - 2000 = $13,000

We would need to create an amortizing schedule at 4.1%, monthly payments (assumed) for 48 months.

She would end up paying $14,117.27 for 48 months

Total Cost = 300 + 1170 + 2000 + 14,117.27 = $17,587.27

Payment Number	Payment	Principal	Interest	Balance
1	$ -294.11	$ -249.69	$ -44.42	$ 12,750.31
2	$ -294.11	$ -250.55	$ -43.56	$ 12,499.76
3	$ -294.11	$ -251.40	$ -42.71	$ 12,248.36
4	$ -294.11	$ -252.26	$ -41.85	$ 11,996.10
5	$ -294.11	$ -253.12	$ -40.99	$ 11,742.97
44	$ -294.11	$ -289.14	$   -4.97	$   1,166.46
45	$ -294.11	$ -290.12	$   -3.99	$       876.33
46	$ -294.11	$ -291.12	$   -2.99	$       585.22
47	$ -294.11	$ -292.11	$   -2.00	$       293.11
48	$ -294.11	$ -293.11	$   -1.00	$                -

Cost of the Honda Civic -

Smog and Administrative Fee = 50 + 250 = $300

Tax = 7.8% of 14500 = $1,131

Downpayment = $2,000

Balance = 14500 - 2000 = $12,500

We would need to create an amortizing schedule at 4.2%, monthly payments (assumed) for 48 months.

She would end up paying $13,601.20 for 48 months

Total Cost = 300 + 1131 + 2000 + 13601.2 = $17,032.20

Payment Number	Payment	Principal	Interest	Balance
1	$ -283.36	$ -239.61	$ -43.75	$ 12,260.39
2	$ -283.36	$ -240.45	$ -42.91	$ 12,019.94
3	$ -283.36	$ -241.29	$ -42.07	$ 11,778.66
4	$ -283.36	$ -242.13	$ -41.23	$ 11,536.52
5	$ -283.36	$ -242.98	$ -40.38	$ 11,293.54
44	$ -283.36	$ -278.45	$    -4.91	$    1,123.58
45	$ -283.36	$ -279.43	$    -3.93	$        844.16
46	$ -283.36	$ -280.40	$    -2.95	$        563.76
47	$ -283.36	$ -281.39	$    -1.97	$        282.37
48	$ -283.36	$ -282.37	$    -0.99	$                 -