Question

You are buying a new car that sells for $28,000. You have two options: Option one is to finance the entire cost @ 1.5 % for 5 years. The other option is to take a rebate of $2000 and finance the remainder at 6.5 % for 5 years. You are trading in a vehicle that has monthly payments of $385.94 with 2.5 years left on the loan @ 6% APR. They will give you $8000 in trade – in. Which is the best deal: Option one or option 2? What will be your monthly payments

Answer 1

Option 1
Financed @ 1.5%
Purchase Price of Car	$28,000
Less: Trade in	$8,000
Amount need to be Financed	$20,000
Rate = 1.5%/12	0.13%
NPer = 5 x 12months	60	months
Payments (PMT) = PMT(.67%,48,-$31000)	$346.2
Option 2
Financed @ 6.5%
Purchase Price of Car	$28,000
Less: Rebate	-$2,000
Less: Trade in	-$8,000
Amount need to be Financed	$18,000
Rate = 6.5%/12	0.54%
NPer = 5 x 12months	60	months
Payments (PMT) = PMT(.67%,48,-$31000)	$352.19
Option 1 is the best deal because its monthly payment is less than the option 2