You are in the process of purchasing a new automobile that will cost you $25,000

Question

You are in the process of purchasing a new automobile that will cost you $25,000. The dealership is offering you either a $1,000 rebate (applied toward the purchase price) or 3.9% financing for 60 months (with payments made at the end of the month). You have been pre-approved for an auto loan through your local credit union at an interest rate of 7.5% for 60 months.

Required: Should you take the $1,000 rebate and finance through your credit union or forgo the rebate and finance through the dealership at the lower 3.9% APR?

Explanation / Answer

Rebate -1000 Cost 25000 Monthly Rate =(1+r/m)^(1/m)-1 '@ 3.9% 0.027% '@ 7.5% 0.052% Case1: Taking rebate and using Auto-Loan Principal and Interest 26822.72 2822.72 Case2: 3.9% APR Principal and Interest 25408.9 408.8992 You should go with the 3.9%APR option as it works out to be much cheaper

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.