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# You want to buy a car, but can make an initial payment of

Customer Question
You want to buy a...

You want to buy a car, but you can make an initial payment of only \$2,000 and can afford monthly payments of at most \$400.
a)     If the APR on auto loans is 12 percent and you finance the purchase over 48 months, what is the maximum price you can pay for the car?
b)     How much can you afford if you finance the purchase over 60 months?

Submitted: 8 years ago.Category: Finance
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Answered in 22 minutes by:
4/26/2009
Financial Professional: Annie Kavitha, Lecturer replied 8 years ago
Annie Kavitha, Lecturer
Category: Finance
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Hello Customer,

Click on the link below for solution.

Solution

Annie Kavitha, Lecturer
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Satisfied Customers: 1,024
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Annie Kavitha and 87 other Finance Specialists are ready to help you
Customer reply replied 8 years ago
how you obtained the PV?
Financial Professional: Annie Kavitha, Lecturer replied 8 years ago

PV is calculated by using the built-in financial calculator in excel sheet.

To obtain the value the following input is given in the first case:

Rate = 1%; No. of periods = 48; Payment per period = 400.

Use PV function to obtain the value.

Place the cursor on B7 cell you will see the function of PV.

Similarly do it for the second case of 60 months.

Hope this is clear. I will clarify if you have any other doubt.

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Customer reply replied 8 years ago
I need the manual procedure, not in Excel
Financial Professional: Annie Kavitha, Lecturer replied 8 years ago
ok just a minute.
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Customer reply replied 8 years ago
ok, i'm waiting
Financial Professional: Annie Kavitha, Lecturer replied 8 years ago

PV = 400 x PVIFA 1%, 48 periods

= 400 x 39.23065

= 15,692.26

Add down payment made 2,000

Maximum price of the car = 17,692.26

B)

PV = 400 x PVIFA 1%, 60 periods

= 400 x 45.1986

= 18,079.45

Add cah down payment of 2,000

Maximum price of the car = 20,079.45

Note: the answers as per financial calculator and manual calculations differ slightly.

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Customer reply replied 8 years ago
Thanks for all
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