Question

Charles is going to purchase a new car that has a list price of $21,450. He is planning on trading in his good-condition 2004 Dodge Neon and financing the rest of the cost over three years, paying monthly. His finance plan has an interest rate of 12.28%, compounded monthly. Charles will also be responsible for 6.88% sales tax, a $1,089 vehicle registration fee, and a $124 documentation fee. If the dealer gives Charles 80% of the listed trade-in price on his car, once the financing is paid off, what percent of the total amount paid will the interest be? (Consider the trade-in to be a reduction in the amount paid.) Dodge Cars in Good Condition Model/Year 2004 2005 2006 2007 2008 Viper $7,068 $7,225 $7,626 $7,901 $8,116 Neon $6,591 $6,777 $6,822 $7,191 $7,440 Intrepid $8,285 $8,579 $8,699 $9,030 $9,121 Dakota $7,578 $7,763 $7,945 $8,313 $8,581 a. 17.64% b. 15.67% c. 16.70% d. 12.86%

Answer 1

The answer is c. 16.70% This is based on the posts I've read online regarding this problem. No solution was given.

These are the amounts you have to consider:
List price of new car - 21,450
Sales tax rate: 6.88% - 21,450 x 6.88% = 1,475.76
vehicle registration fee - 1,089
documentation fee - 124
loan term - 3 years, paid monthly. so, 36 months
interest rate - 12.28% compounded monthly. 
2004 Dodge Neon value - 6,591
trade in value - 6,591 x 80% =  5,272.80

No mention of down payment so the possible amount to be financed is: 24,138.76
The value of the traded car is only considered after the financing has been paid off.