Say that you (or your parents) are purchasing a used car for $22,350. The sales tax is 7.5%, the down payment is $1,200.00, and you have an average credit rating. If your first payment is $475.25, how much of the payment goes toward the principal?
The average rating is 5.85. We're supposed to factor that in somehow, but I don't know what to do. PLEASE give me a hand and type out the way you thing this should be answered.
monthly rate = .0585/12 = .004875
outstanding balance = 22350(1.075) - 1200
= 22826.25
interest for 1st month = 22826.25(.004875)
= 111.28
amount going to principal = 475.25 - 111.28
= $363.97
To calculate how much of the payment goes toward the principal, we first need to determine the total loan amount and the interest rate.
To find the total loan amount, subtract the down payment from the purchase price of the car:
$22,350 - $1,200 = $21,150.
Next, let's consider the interest rate. Since you mentioned an average credit rating of 5.85, we'll assume that the interest rate is based on this rating. However, without additional information, it's challenging to precisely determine the interest rate. For simplicity, let's assume an interest rate of 5%.
Now let's calculate the interest charged for the first payment. To determine the interest amount, we can multiply the loan amount by the interest rate and divide it by the number of months in a year. Assuming the loan term is 5 years (60 months):
Interest for the first payment = ($21,150 * 0.05) / 12 = $88.13.
To find the amount of the payment that goes toward the principal, subtract the interest from the first payment amount:
Principal payment = First payment - Interest for the first payment
Principal payment = $475.25 - $88.13 = $387.12.
Therefore, approximately $387.12 of the first payment goes toward the principal. Keep in mind that these calculations are approximations based on the assumptions made. The actual interest rate and loan terms may vary depending on the lender and your credit rating.