CSC101 Customer Service answers:

Part (a) is easy – and yes you just divide 16000/36 = 444.44

The rest of is not so simple.

If you paid interest only on 15000 at 6.94%, it would be
$1041 per year or $86.75 per month,
but car loans are not interest-only (just like mortgages).

You repay some principal too, which then reduces the principal
for the next payment, making the interest portion smaller
and the next principal portion larger, and this continues.

But it is structured so that the payments are equal.
That is called amortization.

This web page http://www.hughchou.org/calc/formula.html
describes how to calculate monthly payments.

The formula you give is close to his, but not quite the same.
He has P * ( J / (1 – (1 + J) ^ -N))
where P = principal, N = number of payments, and
J = _monthly_ interest rate (in this case 0.0694/12 = .0057833)

That gives 15000 * .0057833 / (1 – 1.0057833^-48) = 358.775984

This is confirmed by the calculator at
This website: http://www.bretwhissel.net/amortization/amortize.html
which can show the whole schedule.
(There are a number of such calculators around the web.)

With monthly payments of 358.78, the total paid would be 17221.44

So it is more expensive to “rent the money” (i.e. Finance the car).

This ignores so-called “opportunity cost”, because if you have
the money up front, you could finance the car, while you invest the money, reducing the cost of the loan. But that is just an extra complication.

For part d),
We want to pay 1000 total interest and 16000 total principal + interest.
So 16000/48 = 333.33

Now we use the same formula:
P * ( J / (1 – (1 + J) ^ -N))
But instead of wanting the result, we know we want 333.33
and want to know J
So 333.33 = 15000 * J / (1 – (1+J)^-48), and solve for J.
15000 / 333.33 = (1 – (1+J)^-48) / J
45 J = 1 – (1+J)^-48
When you solve this for J (using logarithms I guess),
then you multiply by 12 to get the annual rate.

The same calculation page allows you to enter
a payment amount and it tells you the interest rate, which would be
3.1996 % for 48 payments totaling 16000 on a 15000 loan.

That is confirmed by putting .031996/12 = .002666333 as the
monthly interest rate into the formula above.

CSC101 Customer Service answers:

Hmmm you are in deep doodah:( You don’t have good title to the car, so the finance company are totally within their rights to repossess it.

Get after the person who sold it to you.

You could try talking to the finance company and see if they will agree a settlement figure for the car – but I’d HAVE to go after the ********* who sold it to me.

CSC101 Customer Service answers:

Depends if the car is new or not? If its new it will be subsadised by the manafacturer so you can take either of the two and still have 8 to 10% margin to play with at the dealership..See what interest your bank will pay you on the cash back because if the car is new base rates that the dealership can achieve from thier lenders is as low as 2% flat rate in some cases.. So for example if you can get 4.5% for your savings you will be 2.5% up..the sum for working out the interest payable on car finance (not a bank loan) is dependent on the flat rate..for example if you get a flat rate of 2% and are borrowing £1000 over 2 years the total payable will be 4% on the amounr borrowed as its 2% flat rate per year..£2000 x 4% + amount = £2080 divide by the term (24 mths) = payment of £86.66.. Work out what you will be paying back and that will show you the saving 0% will give then ask for a discount as there margin is usually 8 to 10% add that to your cashback and choose the greater amount.. Example:

CASHBACK DEAL
Car £10000
Discount 5% = £500
Casback £1000
Saving = £1500

0% DEAL
Car £10000
NORMAL FINANCE @ 3% FLAT RATE OVER 4 YEARS
Intrest Cost £1200 payments @ £233.33
0% = £208.33 Per Month saving £1200
5% Discount from dealership £500
Total saving on 0% is £1700

So in this case 0% is the better

I know its long winded but i spent 18 years working for dealerships and watching people get conned.. I now run my own used car business and pride my self in being up front.. Hope This HelpsYou

Good Luck