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...

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John Dean is trying to buy a new Ford pickup and has been negotiating with two dealerships

Question:

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 is offering to finance the truck at 0 percent interest for the next 36 months. The second 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 be willing to loan money at 0 percent interest?
Dealer
A dealer in the securities market is an individual or firm who stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). A dealer seeks to profit from the spread between the...