Lexi wants to buy a Tesla Model S . The car will cost $68,000 and she has $20,000 as a down payment. If she will finance the rest with a 4 year 6% APR loan with monthly payments, how much will her monthly payments be?

Explanation:

For an amortized loan, paying back a fixed amount periodically, the formula for each payment is

a = P\left (\dfrac{r(1 + r)^{n}}{(1 +r)^{n} - 1}

where

a  = payment amount per period

P = principal (loan amount)

r = interest rate per period

n = total number of periods (payments)

Data:

                 Cost = $68 000

Down payment = $20 000

   Term of loan = 4 yr

                 APR = 6 %

        Payments = monthly

Calculations:

P = $68 000 - $20 000 = $48 000

n = 4 × 12 = 48

r = 0.06/12 = 0.005

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