1. INSTALLMENT BUYING
WALTER S. SORILLO
MAED – MATHEMATICS
REPORTER

2. What is Installments-Buying?
Buying on an installment plan is usually referred to as deferred-payment or time-payment plan.
Installment-buying, thus refers to the type of purchase which requires the buyer to pay a down payment upon purchase, and to pay the remaining balance in several periodic payments within a specified time span.
The total sum paid through installment is usually higher than the regular cash price.

3. Cost of Installment Buying
Deferred payment price (DPP) –
the total of all monthly payments plus the down payment.
DPP = Total of all Down
monthly payments payment
Amount financed (AF) –
the amount actually borrowed.
AF = Cash price -- Down payment
Finance charge (FC) –
the interest charge.
FC = Total of all Amount
monthly payments financed
Installment loan –
A loan paid off in a series of equal periodic payments. Payments include interest and principal.

4. Cost of Installment Buying
Mary Wilson would like to buy a boat that cost $9,345. If she puts down $300 she can finance the balance for 60 months at 10.5% (monthly payment = $194.38). Calculate the amount financed, finance charge, and deferred payment price.
Amount financed = Cash price -- Down payment
$9, = $9, $300
Finance charge = Total of all Amount
monthly payments financed
$2, = $11, $9,045
($ x 60)
Deferred payment Price = Total of all Down
monthly payments payments
$11, = $11, $300

5. Annual Percentage Rate (APR)
Calculating APR rate by table
Finance charge x $100 = Table 14.1
Amount financed lookup number
Truth in
Lending Act
APR must be
accurate to
the nearest
1/4 of 1%
$2, x 100 = $28.94
$9,045
Between 10.25% %

6. Annual Percentage Rate Table per $100 (Table 14.1)

7. Calculating the Monthly Payment by Formula
The pickup truck advertisement below shows a $ monthly payment. We can check this by formula and by table lookup.
Finance charge + Amount financed
Number of payments of loan
$2, $9,045 60
= $194.38

8. Calculating the Monthly Payment by Table
Step 1. Divide the loan amount by $1,000.
$9,045 = 9.045
$1,000
Step 2. Look up the rate (10.5%) and the number of months (60). At the intersection is the table factor showing the monthly payment per $1,000 ($21.49).
Step 3. Multiply the quotient in Step 1 by the factor in Step 2.
9.045 x $21.49 = $194.38

9. Loan Amortization Table (Table 14
Loan Amortization Table (Table 14.2) (Monthly payment per $1,000 to pay principal and interest on installment loan) (Partial)

10. References: Internet:
Alteres, Priscilla S. et al. Mathematics of Investment. Manila: Rex Book Store.2004.
Alteres, Priscilla S. et al. Business Mathematics. Manila: Rex Book Store.2003.
Internet: