Answer: Elaine should take Dealership's financing option.
Explanation:
Option A
Car Sale Price = $46 585
Down Payment = $15000
Interest rate = 0%
Period = 66 months
Value of Dealer Financing = $46585 - $15000 = <u>$31585</u>
Option 2.
Elaine takes the loan to pay for the car
R = 3.24%
Car price = Loan Amount = $46585
Period (n) = 72 months
Value of Option 2 Loan Financing = Loan Amount (1 + r)^n
Value of Option 2 Loan Financing = $46585(1 + 0.0324^/12)^72
Value of Option 2 Loan Financing = $46585(1 + 0.0027)^72
Value of Option 2 Loan Financing = 56566.482756
Value of Option 2 Loan Financing = $56566.48
Elaine receives a Cash rebate of $10 000
Overall Value of option 2 = $56566.48 - $10 000 = <u>$46566.48</u>
Let us assume Elaine Pays the Down Payment of $15000 AND take A Loan to finance the rest of the Car amount
Car sale price = $46585 - $15000 = $31585
Loan Amount = $31585
Option 2 Loan Financing with down Payment
Option 2 Loan Financing = $31585(1 + 0.0324^/12)^72 + $15000
Option 2 Loan Financing = $31585(1+0.0027)^72 + $15000
Option 2 Loan Financing = 38352.524586 + $15000
Option 2 Loan Financing = $53352.524586
Elaine Receives a Cash Rebate of $10 000
Value of Option 2 with down payment = $53352.524586 - 10 000
Value of Option 2 with down payment = $43352.524586
Value of Option 2 with down payment =<u> $43352.53</u>
When Elaine pays a down payment and takes a loan of $31585, the overall finance is valued at $43352.53, When Elaine takes a loan for the entire car amount the Value of option 2 finance is $46566.48.
Dealership Option Financing Value is $31585. Elaine should take Dealership's financing option
