Question

2. Your cousin is deciding whether to buy a car now or to wait until he has more

money saved. He has two options to buy the car he wants. His first option is to
spend $500 today, then pay $195 per month until it is paid off. His second option
is to spend $4,000 today, then pay $55 per month until it's paid off. He would
have to wait six months to do the second option.
When would he have the car paid off either way?

Answer 1

option 2

Explanation:

I'm using the assumption that he will have to pay for 4 years (as stated in the problem). You will need the length of time he would be making payments (in months) or the total cost of the vehicle to solve this problem.

4 years = 12 x 4 = 48 months

Option 1: 500 + 195 (48) = 500 + 9360 = 9,860

Option 2: 4,000 + 55 (48 - 6) = 4,000 + 55 (42) = 4,000 + 2310 = 6310

If he can wait six months, it will save him about $3,500 to go with Option 2.