what is an example of the important facts on obtaining a loan for a new car as a math problem. Knowing that some facts are:
credit
interest if good credit or high interest if bad credit.
how can i show an example of what i am trying to say in a math problem using formulas for financial mathematics. Any example would be great.
Beside personal credit rating, how quickly you pay off the loan will often determine the percent interest you are required to pay. This may vary with the length of the loan, e.g., 60 months vs. 24 months. Will the buyer make the minimum payment per month or more than the minimum?
The total cost of the car (principal plus interest) will also vary, depending on how much of the price is covered with a downpayment.
To begin, you might try:
Selling price of car (with desired options) + tax and license fees - downpayment + (percent interest times length of loan) = Total cost
It might help to compare the total cost with the cost of the car being completely paid upon purchase.
Since car sellers go through this a great deal, it might be worthwhile to ask sales persons how they calculate the cost to determine the minimum monthly payments.
I hope this helps. Thanks for asking.
To illustrate the important facts about obtaining a loan for a new car using financial mathematics, let's consider an example:
Suppose you are purchasing a car with a selling price of $20,000. You plan to finance this car with a loan for 60 months (5 years). Your credit rating is good, so the interest rate offered to you is 5%.
First, let's calculate how much interest you will pay over the course of the loan:
Interest = Principal * Interest Rate * Time
Interest = $20,000 * 0.05 * 5
Interest = $5,000
So, with good credit, you will pay $5,000 in interest over the 5-year loan term.
Next, let's calculate the total cost of the car, including the downpayment:
Total Cost = Selling Price + Interest
Total Cost = $20,000 + $5,000
Total Cost = $25,000
Now, let's assume you decide to make a downpayment of $5,000. This means you will only need to finance $15,000.
Total Cost = Selling Price + Interest - Downpayment
Total Cost = $20,000 + $5,000 - $5,000
Total Cost = $20,000
By making a downpayment, the total cost of the car will remain $20,000, but your monthly payments will be based on financing $15,000 instead of the full selling price.
Finally, let's calculate the monthly payments assuming you make the minimum payment each month. We'll assume there are no additional fees or charges:
Monthly Payment = Total Cost / Number of Months
Monthly Payment = $20,000 / 60
Monthly Payment = $333.33
So, in this example, with good credit, a 5% interest rate, and a 60-month loan term, your monthly payment would be approximately $333.33.
You can modify this example to consider scenarios with bad credit, different loan terms, higher interest rates, or larger downpayments to see how these factors affect the monthly payment and total cost of the car.
Remember, when dealing with financial mathematics, it's important to consider the specific terms of the loan and consult with financial institutions or professionals for accurate and personalized calculations.