Ward finances $20,000 to purchase a car. If he gets a 2.5% interest rate regardless of loan length, how much interest will Ward save if he finances the $20,000 for 3 years rather than 5 years?

You will use the formula to calculate simple interest for each period of time and then subtract the two amounts to find how much Ward will save.

I=prt

I = 20000 x 0.025 x 3

I = $1500 over 3 years

I = 20000 x 0.025 x 5

I = $2500 over 5 years

$2500-$1500 = $1000 in savings