



 
Cindy, I'm assuming these payments are monthly. Thus the interest over one payment period is (4.5/12) = 0.375% Just before the first payment, the person owes
Get a sheet of graph paper and a calculator and do this sixteen more times, plotting the amount owing from month 0 [buying the car] to month 17. You don't have to draw the graph but it's a pretty curve and you'll get a better feel for how loans work over time. You can use Google or the calculator application on your computer. The principal (not "principle", though the words are related) is what was originally borrowed. It's all been repaid. and interest? Add up all the payments and subtract the principal. The person who made the initial loan then takes $11,156.25 and places You should be able to do this yourself now, working one year at a time as above. If you know how to use a spreadsheet this gives a good way to do calculations like this. If you do a lot of calculation like this there are special onestep formulae, mostly based on sums of geometric series, but they don't give a beginner much understanding of what's actually happening. Also, most highend calculators can do this sort of calculation (look for a menu of "financial calculations" or something like that) and there are also applets on line that do them for you. Good Hunting!  


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