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28 September, 03:42

Sylvia wants to purchase a 2017 Dodge Challenger for a negotiated price of $38,770 inclusive of all costs (options, taxes, delivery charges, etc.). Sylvia will be making a down payment of $8,000. She has a choice between taking a $2500 cash rebate (and arranging her own financing at 4.98% for 36 months) OR selecting the dealer incentive financing of 0.9% APR for 36 months. Assuming Sylvia is most interested in spending the least amount of money possible to purchase the car, which option should she choose?

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  1. 28 September, 03:44
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    Sylvia is most interested in spending the least amount of money possible to purchase the car, she will choose the cash rebate option

    Explanation:

    Calculating Cash rebate:

    Given N = 36

    I/Y = 4.98/12=.415%

    PV = 30770 - 2500 = 28270

    PMT=?

    FV = 0

    PMT = 847.0234

    Considering the dealer incentive

    N=36

    I/Y=.9/12 =.075%=.00075

    PV = 38770 - 8000 = 30770

    PMT=?

    FV = 0

    PMT = 866.633

    After studying the above data we can say that, Sylvia is most interested in spending the least amount of money possible to purchase the car, she will choose the cash rebate option
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