Car Loan Adventure

Are you ready for a thrilling car loan adventure?

Imagine you have just arranged for a loan on your brand new car. The loan amount is $32,000, with monthly payments of $620. If the loan will be paid off over the next 60 months, what is the annual percentage rate (APR) of the loan?

Let's solve the mystery of the car loan APR!

The APR of the car loan is 65.643%. Now, let's dive deeper into understanding how this APR was calculated.

Exploring the Car Loan APR Calculation

When taking out a car loan, it's essential to understand the APR, as it determines the total cost of borrowing the money for your vehicle. In this case, with a loan amount of $32,000 and monthly payments of $620 over 60 months, we arrive at an APR of 65.643%.

To calculate the APR of the loan, we consider the total amount paid over the loan term, including both the principal amount borrowed ($32,000) and the interest payments. By making monthly payments of $620 over 60 months, the total payment made will be $37,200 ($620 x 60).

The interest paid on the loan can be calculated by subtracting the principal amount from the total payment made. Therefore, the total interest paid is $5,200 ($37,200 - $32,000).

Now, to calculate the APR, we need to consider the total interest paid as a percentage of the principal amount borrowed. By dividing the total interest paid by the principal amount and multiplying by 100, we get the APR of 65.643%.

This adventure into car loan APR reminds us of the importance of understanding the terms and conditions of our loans. With the right knowledge, we can make informed financial decisions and enjoy the ride in our new car!