I need help! I've been stuck on this one problem for hours D:

Question

Matt plans to lease a 2009 dodge Dakota pick- up truck 4WD. The sales price of the truck is $25,000. The lease agreements states the following:

Due at signing: $426.71

monthly payment 48 months: $426.71

mileage allowance: 15,000/year

excess mileage fee: $0.18 miles

Acquisition fee: $895

if Matt buys the truck for $25,000 and pays 10% down, how much will he finance? If he finances this balance for 4 years at 2.9% add-on interest ( simple interest), how much will his monthly payments be? What is the total cost of the truck if he finances it?

Answer 1

If Matt buys the truck, paying 10% down, he will be paying $2,500. So he'll need to finance $22,500.

With simple annual interest of 2.9% over 4 years, the interest amount he'll need to pay is:

Interest = principle * rate * time

I = 22500 * .029 * 4 = 2610

 

Adding the interest to the amount financed (principle), he'll need to pay $25,110 over the next four years.

 

There are 48 months in 4 years, so his monthly payment will be 25110 ÷ 48 = $523.125 or $523.13.