Leslie has been offered the choice of either a $1,000 rebate or a 5.5%, 48-month loan for the new car she is purchasing. If Leslie will be financing $15,000 and can get a 7.5%, 48-month loan at her credit union, should she take the $1,000 rebate or the 5.5% loan? (Show all work.)
What will be an ideal response?
Calculation of PMT for 7.5%, 48-month loan from the credit union:PV = 15,000, I = 7.5% ÷ 12 = 0.625%, N = 48, PMT = 362.68Calculation of PMT for 5.5%, 48-month loan from the manufacturer:PV = 15,000, I = 5.5% ÷ 12 = 0.45%, N = 48, PMT = 348.85Leslie's savings if she chooses the 7.5% loan for a period of 48 months = ($362.68 - $348.85) × 48 = $663.84.The amount of savings is less than the rebate of $1,000 that Leslie will receive, so she must take the rebate of $1,000. See 5-1: Buying an Automobile.
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