Greg has negotiated a $20,000 price on a new pick-up truck. The manufacturer is

Question

Greg has negotiated a $20,000 price on a new pick-up truck. The manufacturer is offering a $1,500 rebate or 3.9 %, three-year financing. Greg is also able to get 7 %, three-year financing at his credit union. If Greg plans to finance $18,000 over three years, should he take the rebate or the 3.9 % financing? (Show all work.)

Judy has $2,000 for a down payment on a vehicle and she can afford monthly payments of $400. She wants to finance a vehicle over no more than 4 years. If lenders are currently offering 6 percent interest on 5-year loans, what is the maximum price Judy can pay for a vehicle?

Explanation / Answer

1.$20,000 * 3% (0.03) = $600 $600 * 3 years = $1,800 $20,000 * 7% (0.07) = $1,400 $1,400 * 3 years = $4,200 Now compare. Remember 7 %, three-year financing at his credit union is added to each scenario. $1,800 + $4,200 = $6,000 $1,500 (rebate)+ $4,200 = $5,700 Greg should take the 3.9 % financing. /////////////////////////////////////// 2. $2,000 + ( $400 * 48 months ) = $21,200 $21,200 * 106% = $22,472 The maximum price Judy can pay for a vehicle is $22,472 Hopefully this helped, best of luck.

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