What is the Total Amount Paid on a Car Loan?

Question:

A customer took out a car loan for $16000 at a rate of 12.5% for a term of 5 years. What is the total amount she will pay on the loan?

Answer:

The total amount the customer will pay on the car loan is $26,000.

Calculating the total amount paid on a car loan involves adding the principal amount to the simple interest. In this case, the principal amount is $16,000, the interest rate is 12.5%, and the loan term is 5 years.

To calculate the simple interest, we can use the formula: Simple interest = Principal x Interest rate x Time. Plugging in the values, we get: $16,000 x 0.125 x 5 = $10,000.

Therefore, the total amount paid on the loan is the sum of the principal amount and the simple interest, which is $16,000 + $10,000 = $26,000.

It's important to understand the total amount paid on a loan to manage your finances effectively. If you have any more questions about loan calculations, feel free to ask!