To calculate the monthly payment for the car loan, we can use the formula for the monthly payment on an amortized loan. The formula is:

$M = \frac{P \cdot r \cdot (1 + r)^n}{(1 + r)^n - 1}$

Where:

• $M$ = monthly payment
• $P$ = loan amount (after down payment)
• $r$ = monthly interest rate (annual rate divided by 12)
• $n$ = number of payments (loan term in months)

Step-by-Step Calculation:

1. Determine the down payment: The down payment is 25% of the car price: $\text{Down payment} = 0.25 \times 16,000 = 4,000$

2. Determine the loan amount: The loan amount is the car price minus the down payment: $\text{Loan amount} = 16,000 - 4,000 = 12,000$

3. Calculate the monthly interest rate: The annual interest rate is 8%, so the monthly rate is: $r = \frac{8\%}{12} = \frac{0.08}{12} = 0.0066667$

4. Number of payments: The loan is financed for 60 months, so $n = 60$.

5. Substitute into the formula: $M = \frac{12,000 \times 0.0066667 \times (1 + 0.0066667)^{60}}{(1 + 0.0066667)^{60} - 1}$

Let's calculate this step-by-step:

$(1 + 0.0066667)^{60} \approx 1.48985$ $M = \frac{12,000 \times 0.0066667 \times 1.48985}{1.48985 - 1}$ $M = \frac{12,000 \times 0.0099329}{0.48985}$ $M \approx \frac{119.195}{0.48985}$ $M \approx 243.73$

Final Answer:

The monthly payment will be $243.73.

Would you like to see the details of the calculation process or have any further questions? Here's a list of related topics you might find interesting:

1. How do you calculate the total amount paid over the life of the loan?
2. What effect does changing the interest rate have on the monthly payment?
3. How would the monthly payment change if the loan term were 72 months instead of 60?
4. What is the difference between simple interest and compound interest in car loans?
5. How would making extra payments impact the total cost of the car loan?

Tip: When comparing loan offers, always check the total interest paid over the life of the loan, as a lower monthly payment may not always mean the best deal.