Getting Your Own Wheels

Are you dreaming of buying your own car? Olivia Johnson is. So far she has saved $3,000. Olivia has her eye on a used car that costs $9,000. Olivia figures she can afford a monthly car payment of no more than $200. Using the interest-rate table below, Olivia calculates the monthly payment needed to repay her car loan by multiplying the amount of the loan by the interest factor. She wants to pay off her loan in three years.

Olivia will pay $187.98 a month if she decides to borrow $6,000 for three years.

Calculate

Now look in your local newspaper for a car you would like to buy. How much will it cost? Suppose you can afford 25 percent of the total price for a down payment. How much money will you need to borrow to pay the complete cost of the car you want? On a separate sheet of paper, calculate how much money you will need for your monthly car payment. Calculate what your monthly payment will be if you paid off your loan in 1, 2, 3, or 4 years.

(1)What is the total amount you will pay for your car if you pay it off in 1, 2, 3, or 4 years?

(2)How much interest will you pay on your loan?

(3) Which pay-ment plan would enable you to pay the least amount of money for your car?

(4) Which payment plan would have the lowest payments?