After shopping around, Sue Wallace decided on the car of her choice, a used Honda Civic the dealer quoted her a total price of $10,000. Sue decided to use $2000 of her savings as a down payment and borrow $8000. The salesperson wrote this information on a sales contract that Sue took with her when she set out to find financing.

When Sue applied for a loan, she discussed loan terms with the banking officer. The officer told her that the bank's policy was to lend only 80% of the total price of a used car. Sue showed the officer her copy of the sales contract, indicating that she had agreed to make a $2000, or 20%, down payment on the $10,000 car, so this requirement caused her no problem. Although the bank was willing to make 48-month loans at an annual percentage rate of 9% on used cars, Sue chose a 36-month repayment schedule. She believed she could afford the higher payments, and she knew she would not have to pay as much interest if she paid off the loan at a faster rate. The bank lending officer provided Sue with a copy of the Truth-in-Lending Disclosure Statement shown here:

Questions

• What is perhaps the most important item shown on the disclosure statement? Why?
• What is included in the finance charge?
• What amount will Sue receive from the bank?

TRUTH-IN-LENDING DISCLOSURE STATEMENT (LOANS) \begin{tabular}{llll} \hline \begin{tabular}{l} Annual Percentage \\ Rate \end{tabular} & Finance Charge & Amount Financed & Total of 36 Payments \\ \hline \begin{tabular}{l} The cost of your \\ credit as a yearly \end{tabular} & \begin{tabular}{l} The dollar amount the \\ credit will cost you. \end{tabular} & \begin{tabular}{l} The amount of credit \\ provided to you or on \\ your behalf. \\ 9% \end{tabular} & \begin{tabular}{l} The amount you will have paid \\ after you have made all \\ payments as scheduled. \end{tabular} \\ \hline \begin{tabular}{l} You have the right to receive at this time an itemization of the Amount Financed. \\ I want an itemization. \end{tabular} & \\ \begin{tabular}{l} I do not want an itemization. \\ Your payment schedule will be: \end{tabular} & \\ \hline \begin{tabular}{l} Number of \\ Payments \end{tabular} & Amount of Payments & When Payments Are Due \\ \hline 36 & $254.40 & 1st of each month & \\ \hline \end{tabular}