Concept explainers
To determine:
First year cost of car ownership.
Introduction:
Loan is the amount or thing is taken from another person with the promise of future payment.
Explanation of Solution
Given,
Total repayment in one year is $4,281.12.
Property taxes are $300.
Sales taxes are $450.
Title and tags are $40.
Maintenance and usage costs are $1,500.
Insurance is $2,000.
Formula to calculate total first year cost,
Total first year cost = (Total repayment in one year + Property taxes + Sales taxes + Title and tags + Maintenance and usage costs + Insurance)
Substitute $4,281.12 for total repayment in one year, $300 for property taxes, $450 for sales taxes, $40 for title and tags, $1,500 for maintenance and usage cost and $2,000 for insurance in the above formula.
Total first year cost = $4,281.12 + $300 + $450 + $40 + $1,500 + $2,000 = $8,571.12
Total first year cost is $8,571.12.
Working notes:
Calculation for N’s monthly payments,
Calculation for total repayment in one year,
Total repayment in one year = (Monthly payment × Number of payment in one year)
= $356.76 × 12
= $4,281.12
Calculation for property taxes,
Calculation for sales taxes,
Hence, total first year cost of car ownership is $8,571.12.
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