You (or your parents) are debating about whether to buy a new car for $19,072.00 or a used car for $15,635.00. Sales tax is 4.5%. You (or your parents) plan to make a down payment of $1,200.00 and your credit rating is fair. What is the difference in interest accrued by the end of the first month?

Question

You (or your parents) are debating about whether to buy a new car for $19,072.00 or a used car for $15,635.00. Sales tax is 4.5%. You (or your parents) plan to make a down payment of $1,200.00 and your credit rating is fair. What is the difference in interest accrued by the end of the first month?

Credit New Car APR (%) Used Car APR (%)
Excellent 5.4 5.65
Good 5.95 6.35
Average 6.30 6.90
Fair 7.55 7.60
Poor 9.80 10.0

Answer 1

First, we need to calculate the total amount financed for each option:

New car: $19,072.00 + (4.5% of $19,072.00) = $19,072.00 + $858.24 = $19,930.24
Used car: $15,635.00 + (4.5% of $15,635.00) = $15,635.00 + $703.58 = $16,338.58

Next, we need to subtract the down payment from each total amount financed:

New car: $19,930.24 - $1,200.00 = $18,730.24
Used car: $16,338.58 - $1,200.00 = $15,138.58

Now we can calculate the interest accrued by the end of the first month for each option using the Fair credit rating APR:

New car interest: ($18,730.24 * 7.55%)/12 = $112.56
Used car interest: ($15,138.58 * 7.60%)/12 = $76.58

The difference in interest accrued by the end of the first month is $112.56 - $76.58 = $35.98. Therefore, the difference in interest accrued by the end of the first month is $35.98.