Auto Loan - USE FORMULAS WHEREEVER POSSIBLE!
You have decided to buy a 2007 FORD MUSTANG. The total cost with tax, title, license and optional equipment is $28,900. You will make a down payment equal to 20% of the total cost of the car. The remaining amount will be financed.
You have two financing options. You need to represent BOTH in your spreadsheet.
Option 1 - Get $3,000 cash back. This amount will reduce the amount you need to finance. You will be able to get a 5 year car loan on the remaining amount with a 5.70% interest rate from your bank.
Option 2 - Get no cash back and finance the entire amount. The loan will be for 3 years with a 0.0% interest rate from Ford Co. financing.
Answer the following in your own words in your spreadsheet:
a. What is the amount of money that you will need to borrow under Option 1?
b. What is your monthly payment for Option 1?
c. What is the total amount paid over the term on the loan for Option 1 (i.e. total cost)?
d. How much will you need to borrow if you choose option 2?
e. What is your monthly payment?
f. What is the total amount paid over the term on the loan for Option 2 (i.e. total cost)?
g. Which financing option should you choose? Explain in words right on the spreadsheet you have used to determine these values.