Shay settled on a price of $8,950 for a new car. The dealer had to

Question

add 5% sales tax to this price, but allowed a $1,000 trade-in for
Shay's old car. Although not a universal practice, please add the
sales tax to the price of the new car first and then deduct the trade-
in value. If the dealer required a 22% down payment, calculate the
amount of the purchase price that Shay financed.
a. $6,550.05
b. $1,697.40
c. $6,741.16
d. $1,685.40

Answer 1

First, let's calculate the sales tax that needs to be added to the price of the new car:

5% of $8,950 = $447.50

So, the new price of the car after sales tax is:

$8,950 + $447.50 = $9,397.50

Now, we can deduct the trade-in value:

$9,397.50 - $1,000 = $8,397.50

Next, let's calculate the down payment:

22% of $8,397.50 = $1,847.45

Therefore, the amount of the purchase price that Shay financed is:

$8,397.50 - $1,847.45 = $6,550.05

Therefore, the answer is (a) $6,550.05.