Asked by Anonymous

You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on the best leases available, you have three options. (i) Purchase the car for cash and receive a $1,900 cash rebate from Dealer A. The price of the car is $19,000. (ii) Lease the car from Dealer B. Under this option, you pay the dealer $550 now and $225 a month for each of the next 36 months (the first $225 payment occurs 1 month from today). After 36 months you may buy the car for $10,900. (iii) Purchase the car from Dealer C who will lend you the entire purchase price of the car for a zero interest 36-month loan with monthly payments. The car price is $19,000. Suppose the market interest rate is 4%.
Answered by Reed
So, what is the question?
Answered by Anonymous
What is the net cost today of the cheapest option?
Answered by Reed
Okay: Dealer A's net cost is $19,000 minus the $1,900 rebate. Dealer B offers $225 times 36 months plus the $550 down payment, plus the $10,900 purchase price at the end of the lease.
Dealer C offers zero interest so the net cost is $19,000. You do the math.
Answered by Anonymous
To which option does the 4% interest rate go....all or the last two?
Answered by Reed
No, it does not apply to any of them.
Paying cash involves no loan or interest rate. There is no loan involved in a lease. The third dealer offers zero interest.
Answered by Anonymous
Ok thanks for your help
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