Question

You’ve been building your credit for a few months. You found a nice used car for $12,000, and you’re reviewing financing options.

A bank offered you the following car loan options:

Loan A: A five-year loan with 6.9 percent interest
Loan B: A six-year loan with 6.9 percent interest
Which of the following statements is most likely true?
Question 15 options:

Loan B has a higher monthly payment, and you'll pay more for the car overall.


Loan B has a lower monthly payment, but you'll pay more for the car overall.


Loan B has a higher monthly payment, but you'll pay less for the car overall.


Loan B has a lower monthly payment, and you'll pay less for the car overall.

Answer 1

Loan B has a lower monthly payment, but you'll pay more for the car overall.

Explanation: with the same APR and a longer term, each monthly payment is smaller, but you make more payments so total interest paid is higher. Example for $12,000 at 6.9%:

- 5 years (60 months): ≈ $237/month → total ≈ $14,218 (≈ $2,218 interest)
- 6 years (72 months): ≈ $204/month → total ≈ $14,697 (≈ $2,697 interest)