Need help with a 'buying a car' project

[iDraw96]

I am using a loan calculator to find out the loan amount I will be receiving to buy the car, but in order to do that I need to calculate the interest rate. I am having trouble calculating the interest rate for the car I chose. I went with continuous compounding formulas and tried using both A= P(1+i)^n and


A= P(1+(r/m))^r(t), but could not come up with the right answer. For the method A= P(1+i)^n, I tried equating A= 15,998 (price of my car) and P= 16,000 (the amount of the loan), and vice versa, n= 3*12 (3 years, 12 compounding periods within each year) and then I solved for i. I didn't get a reasonable answer; it was something raised to a negative power. For


A= P(1+(r/m))^r(t), I did pretty much the same as the first, however I divided my final answer to solving r by 12; again, I came up with an unreasonable answer.


I do not know whether or not I am using the wrong numbers, formula, or if I am missing something, but I have tried several times, switching the numbers several times to unsuccessfully find the answer. I even tried Pe^rt, but I didn't think I was on the right track at all.


Any help would be much appreciated.


PS- For your reference, this is the car I went with. http://www.carmax.com/enus/view-car...b-2c8cc0dbbfb2&Ep=search:results:results page
Thank you in advance.

 

[iDraw96]

Hi Denis, thanks for replying.

The loan calculator that I'm using calculates the monthly payment and the estimated loan amount for me. All I have have to do is provide the loan amount that I need (which is 16,000), the interest rate, and the loan term to get the monthly payment (36 months); and the monthly payment, APR, and loan term to get the estimated loan amount that will be given to me to buy the car. Here's the link for your reference [http://www.capitalone.com/auto-fina...ps://www.capitalone.com/auto-financing/rates]

In the instructions for the project, there was a 6% sales tax, but i don't know if that is meant to be used as the interest rate (i don't think so). I know the APR is 2.89% for the car, but APR and interest rate are two different things.

The part I am having trouble with is finding the interest rate so I can put it into the loan calculator and get the monthly payment. For the first part, the loan period is 36 months, and the amount i need is $16,000. I have 2/3 components that I need to calculate the monthly payment; it's just that interest rate that i can't figure out.

Does this make more sense? Let me know if there's anything else I can clear up for you. Thanks again for your help. Sorry for the earlier confusion.

 

[stapel]

No, the interest rate that the bank charges on the loan is not the same thing as the sales tax that your state charges on the transaction.

 

[iDraw96]

Thanks everyone. I think that I was misinterpreting the question. You all were right in the sense that I did not have to calculate the interest rate. By using various loan calculators, they were able to produce an estimation of an interest rate for me. What was confusing me was the fact that the instructions say to calculate the interest- as in the MONETARY amount of interest based on the interest rate, that I would be paying over the 36 month period. With this information, I just use a formula to calculate that. I'm sure I would be using A= Pe^rt for this one; where A= 16,000 (loan amount), P= 460 (monthly payment on loan), r= 2.9% or .029 (the interest rate), and t= 36 (or 3? for 3 years? Not sure about this one.) am I on the right track here? Thanks again everyone for your help. Let me know if there is anything I can clear up for you.