Final answer:
Option D, a 36-month term with a $5,000 down payment, would have the lowest total interest due to the highest down payment reducing the borrowed amount and the shortest loan term decreasing the time for interest to accrue.
Step-by-step explanation:
To determine which financing option would have the lowest total interest for the purchase of a GMC Sierra at $47,000 with a 5.5% APR, we need to compare the interest for each option.
- Option A: 60-month term with a $2,000 down payment.
- Option B: 60-month term with a $3,500 down payment.
- Option C: 36-month term with a $3,500 down payment.
- Option D: 36-month term with a $5,000 down payment.
Comparing the total interest paid involves calculating the interest for the remaining loan balance after the down payment for each term length. Since interest accumulates over time, options with shorter terms will generally have less total interest paid as long as the down payments and APR remain constant.
In this case, option D, which is a 36-month term with a $5,000 down payment, would result in the lowest total interest because it has the highest down payment (reducing the borrowed amount) and the shortest loan term (reducing the time for interest to accrue).