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Tesla Model X

Introduction​:

Growing up comes with many responsibilities, and one of the responsibilities is

purchasing a car. There are many aspects to buying a car, especially when you are a student, like

the price, condition, etc. The main aspect to be focused on in this project will be the loan

required to pay off the car in the long-run.

Picking a car is the most exciting part of the whole process, and in this case, a new

2017 Tesla Model X was chosen to be purchased. On tesla.com, there are many options for

customizing the car, so my final price for the car alone came out to be $98,750. The total price

includes sales tax, too, which will be (98,750*.06) + 98,750. This comes out to be approximately

$104,675. Since this is a really pricey car, a loan will be needed to pay it off. The website for

Bank of America contains information about planning a loan, and the annual interest rate for five

years is 2.69%, making the monthly rate roughly 0.2242%. Since I have enough money to pay

20% of the cost down, I am left with $83,740 to pay with the loan.

Figure 1. Tesla Model X

The Tesla Model X is pictured in the figure above with a black finish. This car was

chosen because I have watched many videos of a celebrity and noticed how much he approves of

it. He also showed a lot of the features you could choose from, which really intrigued me.
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Part A​:

P (1+r)n * r
monthly payment = (1+r)n − 1
83740(1+0.002242)60 * 0.002242
= 60
(1+.002242) −1
≈ $1,493.19
Figure 2. Approximate Monthly Payment

The formula and solution for the monthly payment for the Tesla’s loan is shown above.

In the formula, “P” stands for principal amount, which was found by taking the remainder of the

cost after paying 20% down, $83,740. The “r” represents the monthly interest rate, which was

found by dividing the yearly interest rate, 2.69, by two, which leaves me with a monthly rate of

0.2242%, written as a decimal in the formula. “N” stands for the number of months the loan will

last. When all of the values were substituted, the monthly payment came out to be approximately

$1,493.19.

Figure 3. TVM Function Confirmation

On the TI-nspire cx calculator, there is a function to calculate monthly loan payments.

The first number is the number of months the loan lasts, the second is the yearly interest rate

(percent), then the principal amount, then the desired amount to be owed, then the number of

payments a year and lastly, the number of compoundings per year. The resulting monthly

payment is indeed $1,493.19, but it came out negative with the tvmPmt function since it

calculated the amount that I am paying.


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Part B​:

Table 1
Loan Amount, Interest, and Payment

The principal amount, interest of each remaining amount, and payments for each month

are shown above. Adding up each positive interest amount until the loan ended resulted in a total

interest of $5,851.40. The sum of the loan adds up to $89,591.40, leaving a remainder of

$1,489.85 to be paid after the loan for the Tesla.

month # = seq(n, n, 1, 60) = 1(n − 1) * 1


interest = b1 * 0.002242 = 83740 − (b1 * (0.002242)) n−1
principal = B2 + C 2 − D2 = 83740 − ((b1 * 0.002242)n−1 + (83740 − (b1 * 0.002242)n−1 ))
Figure 4. Explicit and Recursive Formulas

In the month number and interest columns’ individual cells, there was an explicit and

recursive formula that sequentially found the value of each cell. In the month number column, an

explicit formula was entered into the formula bar to be used for the whole column, which

basically said to start with the number one and add one to each row. In the interest column, the

first cell was found, then each row after that depended on that to change the principal amount,

making it recursive, and then multiplied the rate to each new principal amount. For the principal

amount, the sum of the principal and interest was taken, and the monthly payment was subtracted

from that sum. Since there was adding involved the sequences, they are arithmetic sequences.
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Part C​:

Table 2
Increasing the Payment by Ten Percent

With the same format used as Table 1, ten percent of the payment was taken and added to

the original monthly payment, and it came out to be around $1,642.51. As the loan was being

paid off, the amount of money owed became stopped between the 55th and 56th month, meaning

the loan was paid off and finished between those months. When the ten percent was added to the

monthly payment, it also became larger and made the period of time of the loan shorter, making

the total loan amount paid be cheaper. The total amount of interest in this case is $5,284.94,

which is $566.46 less than the original sum of interest of $5.851.40 when subtracted.

Part D​:

P (1+r)n * r
monthly payment = (1+r)n − 1
83740(1+0.002242)36 * 0.002242
= 36
(1+.002242) −1
≈ $2,423.85
Figure 5. Approximate Monthly Payment for Three Years

The monthly payment was found using the same formula as mentioned in Figure 1. The

only change in the substitutions was that “n” was changed to 36 since it is a three-year loan, and

the rate stayed the same since the Bank of America has that option. When this monthly payment
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was calculated, it came out to be about $2,423.85, which is larger than the five-year loan’s

monthly payment.

Table 3
Three Year Loan

The total price of the loan adds up to $88,973.25, which was found by adding the sum of

interest and the principal amount. In comparison, the three-year loan is $618.16 cheaper that the

total amount paid by the five-year plan, $89,591.40, when subtracted from the five-year plan.

Conclusion​:

From this activity, it was learned that loans have so much information hidden within

them. When they are analyzed piece by piece, many puzzling and surprising outcomes occur.

The five-year loan plan had lower monthly payments, yet a higher total loan payment, which

makes sense because it spans over 24 more months than the three-year plan, which had higher

monthly payments and a lower total loan payment. If I were to choose between the two plans, it

would have to be the five-year plan because it would give me space to work with other monthly

payments I would have to manage, like water, utility, phone bills, etc. A disadvantage to this

would be having the car for a long period of time and the possibility of being interested in a new

car or different method of transportation. Overall, loans have a unique aspect to them, and it’s

the fact that you can alter them to your preference. They are key in making anything pricey,

especially a Tesla Model X, into an affordable purchase.

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