The story: A married couple decides to buy a new car, agree on the down payment they will pay, and plan to finance remaining amount needed to buy the car and pay for all taxes with a 66-month car loan. They contact a car dealership in town, find a vehicle they like, and want to finalize the terms. The dealer tells the buyers they can receive either manufacturer's rebates or a special low interest rate on the amount of their loan, if they finance through the manufacturer if the couple decides to receive the discounts and finance through a bank affiliated with the dealer, they will have to finance the purchase with a $20,000 loan and their interest rate based on their credit scores will be 4.2% for the 66-month loan. If the couple decides to go for the low interest rate option, they will have to finance the purchase with a loan in the amount of $21,879.22 and their interest rate will be 0.9% for the 66-month loan. The dealer tells the buyers that their monthly payment for the 66-month loan came out to be the same amount and asks them which option they prefer. Your task as a group of two or three) is to answer the questions below and reach some practical conclusions as to what should be considered a reasonable decision in this case. Questions: 1. Are the monthly payments the same under the two options as the dealer states? Find the payment in each case. (You can use a web-based resource) 2. If the monthly payment is the same and the couple keeps the car for more then the full term of the loan, does it make any difference which option they choose? 3. Using the same calculations we did in class, find the balance of the loan after one, two, three monthly payments for each option. Show the step-by-step calculations (You can confirm your results based on a web-based resource) 4. Your specific group will get additional comparisons to make between the two loans, based on these comparisons does there seem to be a better option? 5. What would be your decision concerning the loan options? The story: A married couple decides to buy a new car, agree on the down payment they will pay, and plan to finance remaining amount needed to buy the car and pay for all taxes with a 66-month car loan. They contact a car dealership in town, find a vehicle they like, and want to finalize the terms. The dealer tells the buyers they can receive either manufacturer's rebates or a special low interest rate on the amount of their loan, if they finance through the manufacturer if the couple decides to receive the discounts and finance through a bank affiliated with the dealer, they will have to finance the purchase with a $20,000 loan and their interest rate based on their credit scores will be 4.2% for the 66-month loan. If the couple decides to go for the low interest rate option, they will have to finance the purchase with a loan in the amount of $21,879.22 and their interest rate will be 0.9% for the 66-month loan. The dealer tells the buyers that their monthly payment for the 66-month loan came out to be the same amount and asks them which option they prefer. Your task as a group of two or three) is to answer the questions below and reach some practical conclusions as to what should be considered a reasonable decision in this case. Questions: 1. Are the monthly payments the same under the two options as the dealer states? Find the payment in each case. (You can use a web-based resource) 2. If the monthly payment is the same and the couple keeps the car for more then the full term of the loan, does it make any difference which option they choose? 3. Using the same calculations we did in class, find the balance of the loan after one, two, three monthly payments for each option. Show the step-by-step calculations (You can confirm your results based on a web-based resource) 4. Your specific group will get additional comparisons to make between the two loans, based on these comparisons does there seem to be a better option? 5. What would be your decision concerning the loan options
