Question

# You are buying a new car that sells for \$28,000. You have two options: Option one...

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

 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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