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Will has started work but needs a car to travel from home. He uses a financecompany loan to buy a $12,000 used electric car. The loan has a term of fiveyears, with an interest rate of 9.5%. The monthly repayments are $252.a. Work out the total cost of the car over five years.b. Calculate the total amount Will will pay in interest over the five year termof the loan.c. Use the Sorted.org debt calculator to explore how much money Will couldsave if he increases the monthly payment to $282.

Question

Will has started work but needs a car to travel from home. He uses a financecompany loan to buy a 12,000usedelectriccar.Theloanhasatermoffiveyears,withaninterestrateof9.512,000 used electric car. The loan has a term of fiveyears, with an interest rate of 9.5%. The monthly repayments are 252.a. Work out the total cost of the car over five years.b. Calculate the total amount Will will pay in interest over the five year termof the loan.c. Use the Sorted.org debt calculator to explore how much money Will couldsave if he increases the monthly payment to $282.

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Solution

a. To calculate the total cost of the car over five years, you need to multiply the monthly payments by the number of months in five years.

So, 252∗12months/year∗5years=252 * 12 months/year * 5 years = 15,120

b. To calculate the total amount Will will pay in interest over the five year term of the loan, you subtract the original cost of the car from the total cost of the car over five years.

So, 15,120−15,120 - 12,000 = $3,120

c. To explore how much money Will could save if he increases the monthly payment to $282, you would need to use the Sorted.org debt calculator. Unfortunately, as an AI, I am unable to use external tools such as this. However, generally speaking, increasing monthly payments can decrease the term of the loan and thus the total amount paid in interest.

This problem has been solved

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