Which option would you choose based on the total cost

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Reference no: EM131571203

Suppose that you are selling your old car and buying a new car. You have saved $5,000 that you will use as a down payment on a new car. The new car is priced at $25,000 plus 8.75% sales tax. You will receive a $1,500 trade-in credit on your existing car and will make a $5,000 down payment on the new car. When you went to a dealer, the dealer offered the following two options:

Option 1: Receive a $3,000 rebate on the price of the car and finance the balance over 4 years at 4.75%.

Option 2: Finance the vehicle for 5 years at 0% interest, but no rebate.

Which option would you choose based on the total cost? How much would you save by selecting one option over another over the repayment period?

Reference no: EM131571203

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