Vehicle Expenses

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#18575

A car is advertised for sale as follows: Cash $20 800, terms $3800 deposit and $935 per month for two years. a. What is the total amount paid for the car on terms? b. Calculate the simple interest rate charged by the selling firm on the balance of the car’s price over the two-year repayment period.
a. total = 3800 + 935 × 12 × 2 = $26 240	total paid will be the deposit plus 24 months of $935 repayments
b. balance owing = $20 800 – $3800 = $17 000 interest = $26 240 – 20 800 = $5440 interest rate = $$\frac{5440}{17000}\times100$$ = 32%	price = $20 800, deposit = $3800 balance owing is the amount you still owe after you pay the deposit and is the amount you borrow interest = total you repay – the price of the carto find the interest rate, divide the interest by the amount of the loan and multiply by 100

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#18577

Mr Smith signs a credit purchase agreement for a motor car priced at $8000. The agreement requires a payment of $2000 cash following by instalments of $145 per month over a 5 year period. a. What is the real cost of the vehicle? b. Find the extra cost of the vehicle c. Find the annual flat interest rate charged.
a. Total = 2000 + 145 × 60 = $10 700	The real cost of the vehicle is the total cost, including the deposit, repayments, all interest and any charges.
b. Interest = 10 700 – 8000 = $2700	interest paid = total paid – cost price
c. balance = 8000 – 2000 = 6000 $$R =\frac{100\times2700}{6000\times5}$$	R = 9% p.a. Find the balance owing: = cost price – deposit Using the formula R = 100I/PN where P = principle borrowed (balance) and n = 5 years

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