## Related questions with answers

Kyle Parker of Fayetteville, Arkansas, has been shopping for a new car for several weeks. So far, he has negotiated a price of $\$ 27,000$ on a model that carries a choice of a $\$ 2500$ rebate or dealer financing at $2$ percent APR. The dealer loan would require a $\$ 1000$ down payment and a monthly payment of $\$564$ for $48$ months. Kyle has also arranged for a loan from his bank with a $7$ percent APR. Use the Decision-Making Worksheet on page $224$ to advise Kyle about whether he should use the dealer financing or take the rebate and use the financing from the bank.

Solution

VerifiedFirst we must find the financial charge for the dealer financing if the rebate is not taken. We will subtract the value of her loan (purchase price minus down payment) from the total amount paid to the bank.

(564 x 48) - (27,000 - 1,000)

27,072 - 26,000 = 1,072

We will assume that the $\$1,000$ down payment will also be applied if Kyle chooses to take the rebate.

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