To get this answer, you would represent 12% as 0.12 (move the decimal point 2 spots to the left to go from 12.0% to 0.12) then you add on 1 to get 1+0.12 = 1.12
Another way to think about it is to have 100% + 12% = 112%, so the new price is 112% of the old price. For example, if the car was $100 and you increase the price by 12%, then it jumps to $112. Notice how 1.12*(old price) = 1.12*100 = 112 = new price
