You are interested in purchasing a used car for $17,250. The dealer offers financing at a rate of 6.8% APR when the purchase is financed for 54 months. If you make a 5% down payment, what would the monthly payment be for this purchase?

The monthly payments will be $353.12

Explanation:

Financing

When a purchase is made at present value and the payment will be financed at a rate of interest i for n periods, the present value PV is

where R is the regular payment (usually monthly).

Solving for R

It's important to recall than only the unpaid amount goes financing, if some down-payment is made, it must be subtracted from the PV to be financed.

The present value of the car is 17,250 from which the buyer will make a 5%  down-payment. It means that the real financing amount is

The rate of interest is

It also follows that n=54.

Computing R

answerreactive approach;