Some family members have come to you for some financial advice. They have to buy a new AC unit for their 7 bedroom house. They will buy the unit and install it themselves. They have decided on the unit that they want, a Whirlpool XZ1000. Two dealers in town have that unit.

Dealer 1 will sell it for $27,000, which is due on the day of purchase. Since the family does not have the money, they will have to get a bank loan for the $27,000. They will get a 3 year loan with an interest rate is 8%, paid annually. The loan calls for equal payments for 3 years at the end of each year. In other words, they will make a payment at the end of the first year, at the end of the second year and at the end of the third year.

Dealer 2 will it sell for $33,000. The terms are as follows: $3,000 is due on the day of purchase and the rest will be paid annually and equally over 3 years. In other words, the dealer will be paid $3,000 on the day of purchase and $10,000 at the end of each of the next three years.

Should they buy the unit from Dealer 1 or Dealer 2?

Please explain and show work.