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March 26, 2017

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A car dealer will sell you a used car for $7,742 with $742 down and payments of $309.93 per month for 24 months. What is the APR?

  • math - ,

    So your present value of the loan = $7000
    n = 24
    i = ??
    P = 309.93

    7000 = 309.93(1 - (1+i)^-24)/i
    solving this for i is very messy, and we have no algebraic formulas that will do that.
    I set up an Excel program where I found
    a montyly rate of .004915 to come withing a few pennies of $7000
    so the APR = 12(.004915) = .05898 or 5.898%

    check: 309.93(1 - 1.004915^-24)/.004915 = 7000.17

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