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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
First, calculate the total cost of each car including sales tax:
New Car: $19,072.00 + (4.5% * $19,072.00) = $19,072.00 + $858.24 = $19,930.24
Used Car: $15,635.00 + (4.5% * $15,635.00) = $15,635.00 + $558.58 = $16,193.58
Next, calculate the amount financed for each car after the down payment:
New Car: $19,930.24 - $1,200.00 = $18,730.24
Used Car: $16,193.58 - $1,200.00 = $14,993.58
Next, calculate the interest accrued for the first month for each car:
New Car (Fair Credit - 7.55% APR): $18,730.24 * (0.0755/12) = $141.17
Used Car (Fair Credit - 7.60% APR): $14,993.58 * (0.076/12) = $114.08
Finally, calculate the difference in interest accrued:
$141.17 - $114.08 = $27.09
Therefore, the difference in interest accrued by the end of the first month is $27.09.