Question

A customer wishes to buy a new car at a year-end sale. The dealer states the price is $10,000 with license and taxes included. If you put $1,000 down and agree to make payments of $200 per month for 5 years, what is the APR using the formula above?

Answer 1

The price after down payment
10,000−1,000=9,000

number of months in 5 years
5×12=60 months

Total paid
200×60=12,000

Total interest
12,000−9,000=3,000

APR formula is
I=(2yc)÷m (n+1)
I=(2×12×3,000)÷(9,000×(6+1))
I=0.1311×100
I=13.11% .....answer