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 $3,000 down payment.
Payment Option 2: You can finance the car for 72 months (6 years) with 1% simple annual interest and no down payment. (Hint: To calculate simple annual interest, use the formula Interest = Principal * Rate * Time (in years). Add the amount of interest to the price of the car.)
Which monthly payment amount is lower? Please exp

Answer 1

Payment option 1 :
16,000 - 3000(down payment) = 13,000
13,000 for 60 months = 13,000/60 = 216.67 per month

Payment option 2 :
I = P * R * T
I = 16,000 * .01 * 6
I = 960

16,000 + 960 = 16,960
16,960/72 = 235.56 per month

So we have :
payment option 1 : 216.67 per month for 60 months
payment option 2 : 235.56 per month for 72 months
what do you think the answer is ?

Answer 2

1