Solution Library

Calculation Of Average Monthly Payment For A Car Sale

Question

You are the owner of a used car business near the York campus. Your company borrows money from a bank on a line of credit with a monthly interest rate of 0.50%. You know that some of your customers may not have the best credit rating, so you have decided that you need to charge all customers a higher interest rate (than your own bank rate) when they finance their purchases. Your average sales price per used car is $6,500 when it is financed for 36 months at an 18% APR with monthly compounding.

a) What is the dollar amount of a customer’s monthly payment on your “average” car sale? Assume payments are made at the end of the month.

b) What is the dollar amount of a customer’s monthly payment if payments are made at the beginning of each month and the customer pays $1,000 cash up front?

c) Would your profit be higher or lower if a customer made cash purchase, paying the entire $6,500 immediately, instead of the 36 payments calculated in part a)? Explain why the profit is different, and compute the dollar amount of the change in profits.

 

Summary

The question belongs to Finance and it discusses about calculating average monthly payment for a car and also whether or not it is profitable if the buyer pays the entire amount once or in 36 months.

Total Word Count 268

Download Full Solution

Comments

  • HWA
    Rasha

    this is a very good website

  • HWA
    maani

    I have 50 questions for the same test your page is showing only 28

  • HWA
    joeanne

    hi can you please help or guide me to answer my assignments. thanks

  • HWA
    joeanne

    hi can anyone help or guide me to my assignments. thanks

  • HWA
    Monik


  • HWA
    Cristina

    This solution is perfect ...thanks

  • HWA
    Janete

    Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes

  • HWA
    Sandeep

    Perfect bank of solution. 

  • HWA
    Oxana

    great !

  • HWA
    Paul Brandon-Fritzius

    thanks for the quick response. the solution looks good. :)

  • HWA
    tina Johnson

    thnx for the answer. it was perfect. just the way i wanted it. 

  • HWA
    Giuseppe

    works fine.