Question
You're looking to buy a fully loaded Kia Optima EX at a price of $27,000. your parents offer to give you 10% of the price,
You're looking to buy a fully loaded Kia Optima EX at a price of $27,000.
your parents offer to give you 10% of the price, $2700, as a down payment and you need to finance the remainder of $24,300. You smartly researched your finance options and got pre approval at a 3.49% APR for 60 months on your own.
Kia is offering 0% APR financing with $1500 cash back or $4000 cash back. The cash back amounts under both options would be used as an additional down payment reducing the amount that you need to finance (borrow). You would use your 3.49% APR pre-approved financing if you elect the $4000 cash back option. Answer the following questions.
1. What would be your monthly car loan payment under the Kia's 0% APR financing offer with $1500 (assume a 60-month loan term)?
2. What would be your monthly car loan payment under the Kia's $4000 cash back offer and your 3.49% APR pre-approved financing (assume a 60-month loan term)?
3. At what APR would you be indifferent between the two offers? In other words, at what APR would you have the same monthly payment (assuming a 60-month loan term) for the $4000 cash back offer as you would with the 0% APR financing offer with $1500 cash back?
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