How Much Total Interest Will Molly Pay Using This Plan

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Molly is celebrating her exciting new career and wants to upgrade…

Molly is celebrating her exciting new career and wants to upgrade her junky old car for a shiny new Jeep Patriot. She heads to Jeep’s website and sees the following financing deals:

Finance for 0% apr

for 36 months

plus up to 1,500 cash allowance

Note: For this activity, assume Molly’s going to pay the exact MSRP of $25,495. This is most likely NOT true, but we’ll use it for simplicity.

Answer the following questions using the details from the 0% APR offer above.
Please round all answers to the nearest dollar.

  1. Molly has a $5000 down payment saved for this purchase, and the dealer’s $1500 Cash Allowance will come straight off her total. How much loan does Molly need
  2. How much will Molly’s monthly payment be?
  3. How much total interest will Molly pay using this plan?
  4. When Molly adds all of her payments, how much will the car cost her?

Part II: Maybe the 1.9% is more manageable?

Oh, boy! Look at that monthly payment from Question 2 above! Molly cannot afford the monthly payment using the 0% financing. She opens up Bankrate’s Loan Calculator to see how much she’d pay with the other financing option.

  1. Using the Loan Calculator and the 1.9% APR offer, how much will Molly’s monthly payment be?
  2. How much total interest will Molly pay using this plan?
  3. When Molly adds all of her payments, how much will the car cost her using this plan?
Read:   The Honeycomb-like Appearance of This Sandstone is a Result of

Part III: Reading the Fine Print

Excited to buy her dream car, Molly rushes into her local Jeep dealership. Molly picks out a car, sits down at the financing desk, and hears the following:

“Well, we ran your credit history. You’ve got a really thin file — just a year’s worth of student loan payments. The deal you saw was for ‘well qualified buyers.’ The best deal we can offer you is 6.6% for 60 months. A little more bad news — the cash allowance is also based on credit history, so you don’t qualify for $500. That said, you’re excited about a Jeep, and I want to see you driving one, so I can do $400 for you!”

  1. Molly still has a $5000 down payment. How much loan does Molly need?
  2. How much will Molly’s monthly payment be using the Bankrate calculator?
  3. How much total interest will Molly pay using this plan?
  4. When Molly adds all of her payments, how much will the car cost her?

Answer & Explanation


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How Much Total Interest Will Molly Pay Using This Plan

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