You have $5,000 down payment on a $20,000 car. The dealer offers you the following two options:

(a) paying the balance with end-of-month payments over the next five years at %

(b) a reduction of $1000 in the price of the car, the same down payment of $5,000, and bank financing of the balance after down payment, over 5 years with end-of-month payments at 12%

Which option is better and why?

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