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Question

You (or your parents) purchase a new car for $19,725.00 plus 4.75% sales tax. The down payment is $2,175.00 and you (or your parents) have an average credit rating. How much interest is accrued after the first month?

Credit New Car APR
(%) Used Car APR (%)
Excellent 5.40 5.65
Good 5.95 6.35
Average 6.30 6.90
Fair 7.55 7.60
Poor 9.80 10.0

Answer 1

To calculate the total cost of the car after sales tax, we first need to find the sales tax amount:

Sales tax = $19,725.00 x 4.75% = $937.69

Total cost of the car after sales tax = $19,725.00 + $937.69 = $20,662.69

Next, we need to find the loan amount after the down payment:

Loan amount = Total cost of the car - Down payment
Loan amount = $20,662.69 - $2,175.00 = $18,487.69

Since the loan amount is $18,487.69, we now need to find the monthly interest accrued based on the given credit rating:

Interest Rate for Average Credit Rating: New Car - 6.30%

Monthly Interest = Loan amount x Monthly interest Rate
Monthly Interest = $18,487.69 x (6.30/100) = $1,166.04

Therefore, the interest accrued after the first month is $1,166.04.