PFIN 5th Edition by Randall Billingsley,Lawrence Gitman,Michael Joehnk

Exercise 10

Evaluating financing packages. Assume that you've been shopping for a new car and intend to finance part of it through an installment loan. The car you're looking for has a sticker price of $18,000. A local dealership has offered to sell it to you for $3,000 down and finance the balance with a loan that will require 48 monthly payments of $333.67. However, adventure Vehicles will sell you the exact same vehicle for $3,500 down, plus a 60-month loan for the balance, with monthly payments of $265.02. Which of these two financing packages is the better deal?