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Question: She has negotiated a sales price of $24,185 and she has a $4,000 down payment. She is eligible for the full $750 cash rebate. Her bank has pre-approved her for a 36-month car loan at 2.00%.

a) Assuming Sara wants the cheapest overall price, which option should she take? Should she take the 0% financing offer for 60 months from the dealer, or should she borrow the money from her bank at 2.00% to pay the dealer and receive the $750 cash rebate?

b) Why should Sara make this decision based on overall price, not monthly payment?

c) Now suppose she is only able to get $350 cash back (with the 2.00% financing from her bank). Does this change her decision?

d) Suppose Sara is able to arrange financing for 3.50% instead of 2.00%. The cash rebate remains at $750. Does this change her decision?

Basic Finance, Finance

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  • Reference No.:- M92767291

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