Problem:
Kyle Parker of Fayetteville, Arkansas, has been shopping for a new car for several weeks. So far, he has negotiated a price of $27,000 on a model that carries a choice of a $2500 rebate or dealer financing at 2 percent APR. The dealer loan would require a $1000 down payment and a monthly payment of $564 for 48 months. Kyle has also arranged for a loan from his bank with a 7 percent APR.
Required:
Question: Use the Run the Numbers worksheet on page 231 to advise Kyle about whether he should use the dealer financing or take the rebate and use the financing from the bank.
Note: Provide support for your rationale.