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 | ||

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