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First, we need to calculate the total amount financed by subtracting the down payment from the total cost of the car:
Total amount financed = $12,500 - $3,500 = $9,000
Next, we calculate the total amount paid over the 48 payments:
Total amount paid = $240 * 48 = $11,520
The total interest paid is the difference between the total amount paid and the total amount financed:
Total interest paid = $11,520 - $9,000 = $2,520
Therefore, Megan paid $2,520 in interest over the course of the 48 payments.