Jane needs a new car, but Jane does not have very good credit, so she knows she is going to pay higher interest. She goes to a local, small dealership and finds a reliable car for $4500. The dealer is very nice and says he will finance her car for only $130 a month for five years. Jane knows she can afford this small payment. How much TOTAL will Jane pay for her car? Did Jane get a good deal, since she can afford this car payment?Cost of Car: $4500Financing Terms: $130 per month for 5 yearsTime period for payments = 5 years = 60 monthsTotal paid = $130/month × 60 months = Total interest = Total payment - Original price
Question
Jane needs a new car, but Jane does not have very good credit, so she knows she is going to pay higher interest. She goes to a local, small dealership and finds a reliable car for 130 a month for five years. Jane knows she can afford this small payment. How much TOTAL will Jane pay for her car? Did Jane get a good deal, since she can afford this car payment?Cost of Car: 130 per month for 5 yearsTime period for payments = 5 years = 60 monthsTotal paid = $130/month × 60 months = Total interest = Total payment - Original price
Solution
To calculate the total amount Jane will pay for her car, we need to multiply the monthly payment by the number of months in the financing term.
7800
This is the total amount Jane will pay over the course of five years.
To calculate the total interest Jane will pay, we subtract the original price of the car from the total payment:
Total interest = Total payment - Original price Total interest = 4500 = $3300
So, Jane will pay $3300 in interest over the course of five years.
Whether or not this is a good deal depends on Jane's personal financial situation and the terms of the loan. If Jane can comfortably afford the monthly payments and the interest rate is competitive, then it could be a good deal. However, if the interest rate is high and Jane could potentially find a better deal elsewhere, then it might not be the best option.
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