Question

A car dealer offers you two deals on a car that costs $16,000.Please calculate the monthly payment, given these two payment options the car dealer is offering.

Payment Option 1: You can finance the car for 60 months with no interest if you make a $1,000 down payment.

Payment Option 2: You can finance the car for 72 months (6 years) with 2% simple annual interest and no down payment. (Hint: To calculate simple annual interest, use the formula Interest = Principal * Rate * Time. Add the amount of interest to the price of the car.)

Which monthly payment amount is lower? Please explain h

Answer 1

Payment Option 1:

$16,000 - $1,000 = $15,000 after down payment

$15,000 / 60months = $250/month

Payment Option 2:

$16,000 * 1.02 / 72months = $226.67/month

Answer 2

The second one is better!!

Answer 3

Thank you!!

Answer 4

No problem