Calculate Car Payment Principal w/ Engineering Economics & 0.75% Interest Rate

The formula used is P*0.0075= $500[1-(1+0.0075)^(-48)] and the calculated initial principal is $6459.50. The formula was checked and deemed correct, with the initial result being $6500. The interest for the loan would be $17500.
  • #1
blackunicorn
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1. Assume monthly car payments of $500 per month for 4 years and an interest rate of 0.75% per month. What initial principal will this repay?2. I'm looking for the formula that would be used to calculate it and how to apply it.3. My attempt - P*0.075= $500[1-(1+0.075)^(-48) I calculated 48 by 4 years multiply by 12

My answer is 6459.50. Am I right or somewhere in the ball park? If I am wrong can you explain with what formula should be used?
 
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  • #2
I checked your formula, and it is correct, but it should have 0.0075 , rather than 0.075.
 
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  • #3
Here's a check for you initial result: If you make 48 payments of $500, that comes out to $24000. Does it seem reasonable to you that at 9% interest, your original principal would be $6500, and the interest would be $17500?

Chet
 

What is the formula for calculating car payment principal with an engineering economics and 0.75% interest rate?

The formula for calculating car payment principal is:
P = (A/i) * (1 - (1 + i)^(-n))
where P is the principal amount, A is the total loan amount, i is the interest rate, and n is the number of payments.

How do I determine the total loan amount for a car purchase?

The total loan amount can be determined by adding the down payment amount to the car's purchase price. If you are trading in a car, the trade-in value can also be subtracted from the purchase price before adding the down payment.

What is the importance of using engineering economics in calculating car payments?

Engineering economics takes into account the time value of money, which is crucial in making financial decisions. It considers the present value of money and the potential future value, allowing for a more accurate and comprehensive calculation of car payments.

How does a 0.75% interest rate affect my car payments?

A 0.75% interest rate is relatively low and can lead to lower monthly car payments. This is because the interest rate is a percentage of the loan amount, so a lower rate means less interest to be paid over the life of the loan.

Can I negotiate the interest rate for my car loan?

Yes, you can negotiate the interest rate for your car loan. It is important to shop around and compare rates from different lenders to find the best deal. Additionally, having a good credit score and a stable source of income can also help in negotiating a lower interest rate.

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