Question
Mike owns a 2010 Honda Accord in good condition, with an estimated resale value of $5,000. Mike is thinking about trading in his current car
Mike owns a 2010 Honda Accord in good condition, with an estimated resale value of $5,000.
Mike is thinking about trading in his current car for a Toyota RAV4. Toyota will cost about $20,000. The dealer offered two methods of payment, along with the immediate trade-in of Mike's car: (i) pay $18,000 a year from now or (ii) pay in 12 convenient installments of $1,500 per month at the end of each month and in a year from now the car will be paid off. Mike wants to know which is the cheaper method of payment between these two methods. Do you think that either choice is a good deal?
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