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?
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| Bank Option | Dealer Option | Selection Explanation: |
| Sales Price |
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| Down Payment |
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| Cash Rebate |
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| |
| PV |
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| |
| N |
|
| |
| I |
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| |
| FV |
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| PMT |
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| Total Payment |
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| Total Cost |
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- 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?
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| 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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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?
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| 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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