Sylvia wants to purchase a 2017 Dodge Challenger for a negotiated price of $38,770 inclusive of all costs (options, taxes, delivery charges, etc.). Sylvia will be making a down payment of $8,000. She has a choice between taking a $2500 cash rebate (and arranging her own financing at 4.98% for 36 months) OR selecting the dealer incentive financing of 0.9% APR for 36 months. Assuming Sylvia is most interested in spending the least amount of money possible to purchase the car, which option should she choose?

Sylvia is most interested in spending the least amount of money possible to purchase the car, she will choose the cash rebate option

Explanation:

Calculating Cash rebate:

Given N = 36

I/Y = 4.98/12=.415%

PV = 30770 - 2500 = 28270

PMT=?

FV = 0

PMT = 847.0234

Considering the dealer incentive

N=36

I/Y=.9/12 =.075%=.00075

PV = 38770 - 8000 = 30770

PMT=?

FV = 0

PMT = 866.633

After studying the above data we can say that, Sylvia is most interested in spending the least amount of money possible to purchase the car, she will choose the cash rebate option