Monthly Car Payments Quick Check

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What is a down payment?

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A down payment is an initial payment made when something is bought on credit, typically expressed as a percentage of the total purchase price.

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How do you calculate the total amount to be financed for a car loan?

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Total amount to be financed = Cost of the car - Down payment.

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What does APR stand for in car loans?

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APR stands for Annual Percentage Rate, which is the annual rate charged for borrowing or earned through an investment.

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What is the formula to calculate monthly car payments?

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Monthly Payment = [P * r(1 + r)^n] / [(1 + r)^n - 1], where P = loan amount, r = monthly interest rate, n = number of payments.

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If a car costs $24,000 and a buyer makes a $5,000 down payment, how much is financed?

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$19,000 is financed.

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What is the significance of comparing loan offers?

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Comparing loan offers helps determine which loan has the lowest interest and best terms, saving money over time.

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How does the length of a loan affect monthly payments?

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Generally, longer loan terms result in lower monthly payments but higher total interest paid.

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What is the impact of a higher APR on monthly payments?

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A higher APR increases the monthly payments and the total interest paid over the life of the loan.

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What is the relationship between loan term and interest rates?

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Shorter loan terms often have lower interest rates compared to longer terms.

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How do you determine the down payment amount if given a percentage?

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Down Payment Amount = Total Cost of the Car * (Down Payment Percentage / 100).