You can buy a car through two options:
1. Pay 10% down and finance the balance through General Motors Acceptance Corporation (GMAC) at a 0.9% annual rate of interest for 48 months.
2. Take the $2500 rebate, pay 10% own, and finance the balance through the U of I Credit Union at an 8% annual rate for 48 months. You may do anything you want with the $2500, except use it for part of the down payment.

If the cost of the car is $50,000 (including license and taxes), which option should you choose? Show your work and prove your answer.

You should make each of the options show you their loan papers which have to disclose the actual cost of the loan. There will be a bottom line on both loan papers which will show you the total amount paid out though the life of the loan.

This work is already done for you, and they are required to furnishyou that info. ( many have hidden fees and the such, so get their bottom line from them in writing.

Now I could preach all night about buying a 50,000 car on payments new.

You do realise you lose about 10,000 the day you drive off the parking lot.

$45,000 @0.9% interest would give a payment of $954.83 for 48 months = $45,831.73 Total Paid.

$45,000 @8.0% interest would give a payment of $1,98.58 for 48 months = $52,731.84. Less the $2,500 rebate = $50,231.84 Total Paid.

No contest: GMAC @ 0.9% beats the other option by $4,400.11.

I certainly hope that this was not a math problem for school.

This was CLEARLY a school problem. First there are very few cars that cost $50K but the real clue was this phrase: "show your work and prove your answer.".

As a general rule, if it even remotely looks like a homework question, I will not answer unless the OP shows us they have done the work. Homework assignments are meant for the student to do, not someone else. Its one thing to help with a specific snag, but not do the work for them.

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Originally Posted by ScottGem

This was CLEARLY a school problem. First there are very few cars that cost $50K but the real clue was this phrase: "show your work and prove your answer.".

As a general rule, if it even remotely looks like a homework question, I will not answer unless the OP shows us they have done the work. Homework assignments are meant for the student to do, not someone else. Its one thing to help with a specific snag, but not do the work for them.

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I agree, seen a lot of threads with good questions but are not realistic (figuresdont apply in real buying/ finance situation). Hope these students would also present their answers here and then well give comments

buying a new car is a bad idea financially... unless your super rich and can pay cash for it.

new cars lose 60% of value in the first 4 years... it's not a good place to put money, especially if your doing debt and a loan for it.

check this out

Drive Free, Retire Rich

If you can't figure this out for yourself, why are you buying a $50,000 car ? Or is this your homework and you rather let someone else do the work for you?