Financial planning cases $7-1$

The Johnsons' Credit Questions

They are considering trading their car in for a newer used vehicle so that Harry can have dependable transportation for commuting to work. The couple still owes $$4,860$ to the credit union for their current car, or $$270$ per month for the remaining $18$ months of the $48-$month loan. The trade$-$in value of this car plus $$1,000$ that Harry earned from a freelance interior design job should allow the couple to pay off the auto loan and leave $$1,200$ for a down payment on the newer car. The Johnsons have agreed on a sales price for the newer car of $$16,000.$ The money planned for tires will be spent for other incidental taxes and fees associated with the purchase.

Using the Garman$/$Forgue companion website or the information in Table $7-2,$ calculate the monthly payment for a loan period of three, four, five, and six years at $5$ percent APR. Round your answers to the nearest cent. Round Monthly Installment Payment for a Loan in intermediate calculations to the nearest cent.

For a $3-$year loan: $

For a $4-$year loan: $

For a $5-$year loan: $

For a $6-$year loan: $

Describe the relationship between the loan period and the payment amount:

As the loan period is extended, the monthly payment increases $v$