A friend of yours just bought a new sports car with a 4500 d

A friend of yours just bought a new sports car with a $4,500 down payment, and her $32,000 car loan is financed at an interest rate of 0.50% per month for 36

months. After 2 years, the \"Blue Book\" value of her vehicle in the used-car marketplace is $10,000.

a. How much does your friend still owe on the car loan immediately after she makes her 24th payment?

b. Compare your answer to Part (a) to $10,000.

This situation is called being \"upside down.\" What can she do about it?

Solution

a. After 24th payment, she owes $11311=32000-20689

b. When compared to blue book of 10000, she owes more by $1311

With the loan amount more than book value, she can ask the trader to include the difference amount before trading and get a better deal or needs to cover the difference amount before making the sale.