Question 5-C: The higher the FICO score, the lower the interest rate on a ...

Engineering Economy

The higher the FICO score, the lower the interest rate on a car loan. For example, the total interest paid on a $20,000 car loan over 3 years will be $2,181 for a FICO score of 660. The total interest on a $20,000 car loan with a FICO score of 760 will be only $1,056. Thus, the higher FICO score results in a total savings of $1,125 (over the life of the loan) or $31.25 per month. If the MARR of the buyer is 1% per month, what is the present worth of the savings? Be sure to state your assumptions. (5.3)

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