5. Imagine you've just graduated, you've started a nice job, and you now need to buy...
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5. Imagine you've just graduated, you've started a nice job, and you now need to buy a new or lightly used car. You find a nice car for $30,000. You do not have enough saved up to pay for that car, so you decide you will borrow the purchase price and then pay off the loan over time. a. You agree to take a 60-month loan. If the interest rate on that loan is 7%, what will your monthly payment be? b. Before you can finalize the deal, the salesman approaches you with two buyer incentive plans you could choose. (These plans attempt to make purchases easier on the buyer so more people will buy cars.) The options offered are: Cash back plan-The dealer will give buyers $3500 cash back when they make the purchase. The money comes at the time of the sale, so it effectively lowers the price by the amount of the cash back. You will still need to borrow the remainder and pay it off over 60 months at the same rate as before. Interest rate plan-The dealer will provide a loan on the full purchase price, but the rate will be only 2.9%. You will still need to borrow the full purchase price and pay it off over 60 months. Which incentive plan will be better for you? Explain. 5. Imagine you've just graduated, you've started a nice job, and you now need to buy a new or lightly used car. You find a nice car for $30,000. You do not have enough saved up to pay for that car, so you decide you will borrow the purchase price and then pay off the loan over time. a. You agree to take a 60-month loan. If the interest rate on that loan is 7%, what will your monthly payment be? b. Before you can finalize the deal, the salesman approaches you with two buyer incentive plans you could choose. (These plans attempt to make purchases easier on the buyer so more people will buy cars.) The options offered are: Cash back plan-The dealer will give buyers $3500 cash back when they make the purchase. The money comes at the time of the sale, so it effectively lowers the price by the amount of the cash back. You will still need to borrow the remainder and pay it off over 60 months at the same rate as before. Interest rate plan-The dealer will provide a loan on the full purchase price, but the rate will be only 2.9%. You will still need to borrow the full purchase price and pay it off over 60 months. Which incentive plan will be better for you? Explain.
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