Question

A friend of yours just bought a new sports car with a ​$4,500 down​ payment, and her $32,000 car loan is financed at an interest rate of 0.50​% per month for 36

months. After 2​ years, the​ "Blue Book" value of her vehicle in the​ used-car marketplace is ​$10,000.

a. How much does your friend still owe on the car loan immediately after she makes her 24th payment?

b. Compare your answer to Part​ (a) to ​$10,000.

This situation is called being​ "upside down." What can she do about​ it?

Answer 1

LOAN AMOUNT		32000
RATE OF INTEREST PER ANNUM		6%
RATE OF INTEREST PER MONTH		1%
NO OF INSTALLMENT		36

MONTHS	EMI	INTEREST	PRINCIPAL REPAYMENT	OST PRINCIPAL
0				32000
1	974	160	814	31186
2	974	156	818	30369
3	974	152	822	29547
4	974	148	826	28722
5	974	144	830	27892
6	974	139	834	27058
7	974	135	838	26219
8	974	131	842	25377
9	974	127	847	24530
10	974	123	851	23679
11	974	118	855	22824
12	974	114	859	21965
13	974	110	864	21101
14	974	106	868	20233
15	974	101	872	19361
16	974	97	877	18484
17	974	92	881	17603
18	974	88	885	16718
19	974	84	890	15828
20	974	79	894	14933
21	974	75	899	14035
22	974	70	903	13131
23	974	66	908	12223
24	974	61	912	11311
25	974	57	917	10394
26	974	52	922	9473
27	974	47	926	8546
28	974	43	931	7616
29	974	38	935	6680
30	974	33	940	5740
31	974	29	945	4795
32	974	24	950	3846
33	974	19	954	2892
34	974	14	959	1932
35	974	10	964	969
36	974	5	969	0

a. After 24th payment, she owes $11311=32000-20689

b. When compared to blue book of 10000, she owes more by $1311

With the loan amount more than book value, she can ask the trader to include the difference amount before trading and get a better deal or needs to cover the difference amount before making the sale.