Question
Elaine has negotiated a sales price of $46,585 and she has a $15,000 down payment. She is eligible for the full $10,000 cash rebate. Her
Elaine has negotiated a sales price of $46,585 and she has a $15,000 down payment. She is eligible for the full $10,000 cash rebate. Her bank has pre-approved her for a 72-month car loan at 3.24%. Assuming Elaine wants the cheapest overall price, which option should she take? Should she take the 0% financing offer for 66 months from the dealer, or should she borrow the money from her bank at 3.24% to pay off the dealer and receive the $10,000 cash rebate?
| Bank Option | Dealer Option | Selection Explanation: |
Sales Price |
|
|
|
Down Payment |
|
| |
Cash Rebate |
|
| |
PV |
|
| |
N |
|
| |
I |
|
| |
FV |
|
| |
PMT |
|
| |
Total Payment |
|
| |
Total Cost |
|
|
- Now suppose she is only able to get $1,000 cash back (with the 3.24% financing from her bank). Does this change her decision?
| Bank Option | Dealer Option | Selection Explanation: |
Sales Price |
|
|
|
Down Payment |
|
| |
Cash Rebate |
|
| |
PV |
|
| |
N |
|
| |
I |
|
| |
FV |
|
| |
PMT |
|
| |
Total Payment |
|
| |
Total Cost |
|
|
c. Suppose Elaine is able to arrange financing for 8.69% instead of 3.24%. The cash rebate remains at $10,000. Does this change her decision?
| Bank Option | Dealer Option | Selection Explanation: |
Sales Price |
|
|
|
Down Payment |
|
| |
Cash Rebate |
|
| |
PV |
|
| |
N |
|
| |
I |
|
| |
FV |
|
| |
PMT |
|
| |
Total Payment |
|
| |
Total Cost |
|
|
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