Alice Harzem wanted to purchase a new car for $18,400. A dealer offered her financing through a local bank at an interest rate of 13.5% compounded monthly. The dealer’s financing required a 10% down payment and 48 equal monthly payments. Because the interest rate was rather high, Alice checked with her credit union for other possible financing options. The loan officer at the credit union quoted her 10.5% interest for a new‐car loan and 12.25% for a used‐car loan. But to be eligible for the loan, Alice had to have been a member of the credit union for at least six months. Since she joined the credit union two months ago, she has to wait four more months to apply for the loan. Alice decides to go ahead with the dealer’s financing and, four months later, refinances the balance through the credit union at an interest rate of 12.25% over 48 months (because the car is no longer new).
(a) Compute the monthly payment to the dealer.
(b) Compute the monthly payment to the credit union.
(c) What is the total interest payment for each loan transaction?