Math - Algebra 1 [ i need help with this question ]?

Question

A car dealer offers you two deals on a car that costs $16,000.Please calculate the monthly payment, given these two payment options the car dealer is offering.

Payment Option 1: You can finance the car for 60 months with no interest if you make a $1,000 down payment.

Payment Option 2: You can finance the car for 72 months (6 years) with 2% simple annual interest and no down payment. (Hint: To calculate simple annual interest, use the formula Interest = Principal * Rate * Time. Add the amount of interest to the price of the car.)

Which monthly payment amount is lower? Please explain how you arrived at your answer and show all of your work.




i really dont understand this question. can you please help me. thank you.

Answer 1

Option 1- $16,000- $1,000= $15,000 / 60 months = $250 per month



Option 2- Simple Interest- $16,000 X .02 X 6= $1,920

$16,000 + $1,920= $17,920 / 72 months= $248.89 per Month



Option 2 is the lower per month payment but you pay more overall

Answer 2

Hi



Here is how I would solve this question...it's actually quite simple



Monthly payment for Payment option 1:



First of all we want to find the amount we are paying for the car:

The total price of the car - $1000 down payment

= $16000 - $1000

= $15000



Now, $15000 is the amount you will be paying over the period of 60 months,so each month you will pay:



$15000/ 60 = $250



Therefore, the monthly payment for payment option 1 is $250.





Now the monthly payment for payment option 2:



The formula for Simple annual interest is: Principal * Rate* Time



Therefore the interest you have to pay in 72 months( 6 years ) is:



16000 * 2%* 6

= 16000 * .02 * 6

= 1920 dollars



So, the total amount you will be paying in 6 years is:



$16000 + $ 1920

= 17920 dollars



Therefore every month you will have to pay:

$17920/72= 248.88 or 249 dollars



For payment option 1 you will have to pay $250 dollars per month and for option 2 you have to pay 249 dollars per month. Therefore, the payment option 2 will be cheaper and the payment is lower.





**** NOTE **** Did you notice that even though you are paying less each month for payment 2, you are actually paying more in total? This is because you are the paying the monthly amount in payment option 2 for a longer period of time. In payment option 1, you are paying more each month, but in total you end up saving $2920 dollars. So if this was in real life, I would go with payment option 1.



Hope I helped, good luck !

Answer 3

payment option 1:

16,000 - 1,000 = 15,000 (amount financed)

15,000 / 60 = 250

$250 / month



option 2



I = P * R * T

I = 16000 * .02 * 6

I = 1920



amount financed = 16000 + 1920 = 17920

monthly payment = 17920/72 = $248.89



option two has lower monthly payment

Answer 4

Option 1:

16,000 - 1,000 = 15,000

15,000/60 = $250 a month



Option 2:

Interest = 16,000 * .02 * 6

Interest = 1,920

1,920 + 16,000 = 17,920

17,920/72 = $248.89 a month