Kangaroo auto is offering free credit on a $10,000 car. You can pay $1000 down and...

Kangaroo auto is offering free credit on a $10,000 car. You can pay $1000 down and then $300 per month ($9,000 ÷ 30 months) for 30 months. Turtle Motors, next door, does not offer free credit but will sell you the same car for $9,000 with 100% financing at 8% for 30 months. What are your monthly payments at Turtle Motors? Which offer is the best offer?

Expert Solution

	Monthly payment at Turtle Motors	[P×r×(1+r)^n]÷[(1+r)^n-1]

	Here,

1	Interest rate per annum	8.00%
2	Number of years	2.50
3	Number of compoundings per per annum	12
4 = 1÷3	Interest rate per period ( r)	0.67%
5 = 2×3	Number of periods (n)	30
	Loan amount (P)	$ 9,000

	Monthly payment at Turtle Motors	$ 331.99
		90000.67%(1+0.67%)^30)/((1+0.67%)^30-1)

Kangaroo Auto is best option

jeff jeffy answered 2 years ago

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