John Dean is trying to buy a new Ford pickup and has been negotiating with two dealerships on identical trucks with sticker prices of $ 42,200. The first dealer is offering to finance the truck at 0 percent interest for the next 36 months. The second dealer has offered to sell John the truck for $ 36,000 and will finance the price with a bank loan over the next 36 months at a 12 percent annual rate of interest. Which of the two deals is better for John if 12 percent is the going truck loan interest rate? Why would the first dealer be willing to loan money at 0 percent interest?
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