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Tim wants to buy a new Dodge Ram pickup, which costs $40,000. He will pay a down payment of 10 percent and finance the rest at 12 percent. If he finances the vehicle over 5 years, how much will his total finance charge be?

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jepessoa

Answer:

total finance charge = $12,048

Explanation:

The total finance charge of a credit is the amount of interest and other expenses that a customer will have to pay for borrowing a credit.

Tim will make a $4,000 down payment and finance $36,000 at 12% for 60 months. His monthly payment will be $800.80, so after 5 years he will have paid a total of $800.80 x 60 = $48,048

To determine the total finance charge we must subtract the loan's principal from $48,048:

total finance charge = $48,048 - $36,000 = $12,048

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