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Pay off the amount borrowed to purchase the car with a 5

You are considering buying a new car for $37,000. If you purchase the car you will pay $7,000 of the purchase price as a down payment. Below are two options to choose from.

Option 1: Pay off the amount borrowed to purchase the car with a 5 year loan, and the annual percentage rate (APR) will be 0%.

Option 2: Receive a $2,000 instant rebate. This will lower your loan amount. Pay off the amount borrowed to purchase the car with a 5 year loan, and the annual percentage rate (APR) will be 3.9%.

(A) Which option should you choose? Why?

(B) How much should the rebate be in order to make the two options equal?

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Finance Basics: Pay off the amount borrowed to purchase the car with a 5

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Finance Basics: Pay off the amount borrowed to purchase the car with a 5

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