Question

What would be the finance charge on a 5-year loan for a new Honda Accord costing $32,000 at 3.99% APR? *

Answer 1

Finance charge = Monthly payment*Months of payment - Borrowed amount = (n*A)-P
n= years*12=5*12= 60 months, P =$32,000, APR=3.99% = 0.0399

Monthly payment (A)  ={ APR/12*P}/{1-(1+APR/12)^-n} = {0.0399/12*32000}/{1-(1+0.0399/12)^-60} = $589.18
Therefore,

Finance charge = 589.18*60-32000 = $3,351.06