Assume you will purchase a new car. The dealer is currently offering a special promotion: you can choose

A) a $1500 rebate up front with 6% financing

B) 0% financing for the first 36 months and 6% financing for the last 2 years.Both loans are 5 years.

Find a new car for sale, compute the following below for A and B:

For promotion A

Compute the cost of the car after the rebate

Compute your monthly payment at the 6% interest.

Compute the final amount you paid (including interest)

Subtract the price of the car from the amount paid to get the amount of the interest paid.

For promotion B

Since 3 years is 3/5 of the loan, take 3/5 the price and compute the monthly payment (this amount divided by 36 since there is no interest).

Take the remaining 2/5 of the loan and compute the monthly payment at the 6% interest for the remaining 2 years.Multiply the monthly payment by 24 to get the total amount spent

Add the36 monthly payments from years 1-3 to the 24 monthly payments from years 4-5

Compute the final amount you paid (including interest)

Subtract the price of the car from the total amount you paid to get the amount of the interest you paid.

Conclusion

Compare the final amount paid from promotion A and from promotion B and which was the better buy?