Question

Pat Radigan is planning to buy a Toyota hybrid for $18,749 with $1,500 down and plans to finance the car. Citizens’ Financial Bank quoted a finance charge at 8.5% for 48 months; Charter One Bank quoted him a finance charge at 8% for 60 months.

a. What would be his monthly payment to Citizens’ Financial Bank? (Do not round intermediate calculations. Round your answer to the nearest cent.)

b. What would be his monthly payment to Charter One Bank? (Do not round intermediate calculations. Round your answer to the nearest cent. )

c. How much more would his monthly payment be on the 48-month loan? (Do not round intermediate calculations. Round your answer to the nearest cent.)

Answer 1

a. Cost of car = $18749, Down payment = $1500, Finance charges = 8.5% and No of months = 48 months

Loan = Cost of car - Down payment = 18749 - 1500 = 17249

Monthly rate = Finance charges / 12 = 8.5%/12

To find monthly payment for Citizen's Financial Bank, we will use pmt function in excel

Formula to be used in excel: =pmt(rate,nper,-pv)

Using pmt function in excel we get monthly payment for citizen's financial bank = 425.1585 = $425.16 (rounded to nearest cent)

b.Cost of car = $18749, Down payment = $1500, Finance charges = 8% and No of months = 60 months

Loan = Cost of car - Down payment = 18749 - 1500 = 17249

Monthly rate = Finance charges / 12 = 8%/12

To find monthly payment for Charter one bank, we will use pmt function in excel

Formula to be used in excel: =pmt(rate,nper,-pv)

Using pmt function in excel, we get monthly payment for Charter One bank = 349.7475 = $349.74 (rounded to nearest cent)

c. Extra monthly payment on 48 month loan = Monthly payment on 48 month loan - Monthly payment on 60 month loan = 425.16 - 349.74 = $75.42

Hence his monthly payment on 48 month loan will be more by $75.42