Question

you are purchasing a new car for 14000 and have been given a promotional offer by dealership which allows you to purchase the vehicle using 1% apr financing on a 60 month loan. you had planned on using your credit union, which had agreed to finance the car at 6% interest but you certainly now prefer to accept the dealerahip’s offer. given this promotional rate, what is the true cost of this car for you?

please show the steps

Answer 1

True cost of the car can be calculated using financial calculator with below key strokes:

N= no. of months = 60; PMT= interest amount = $0; PV= present value = -$14,000; I/Y= interest rate = 1% > CPT=compute > FV= future value = $25,433.75

So, True cost of the car is $25,433.75.

Note: PV needs to be entered as negative value otherwise financial calculator will give FV negative.