Answer: Option A:
To calculate the total amount Owen will spend on Option A, we need to calculate the monthly payment and then multiply it by the number of months:
First, we need to calculate the total amount of the loan. Owen is making a down payment of $3200, so he will be borrowing $28,820 (the price of the car minus the down payment).
Next, we can use the formula for calculating the monthly payment for a loan:
P = (r * A) / (1 - (1 + r)^(-n))
where P is the monthly payment, r is the monthly interest rate, A is the total amount of the loan, and n is the number of months.
For Option A, the monthly interest rate is 1.3% / 12 = 0.01083, the total amount of the loan is $28,820, and the number of months is 36. Plugging these values into the formula, we get:
P = (0.01083 * 28,820) / (1 - (1 + 0.01083)^(-36)) = $860.45
Therefore, the total amount Owen will spend on Option A is:
36 * $860.45 = $30,975.98
Option B:
For Option B, we need to take into account the $1500 cash back that Owen will receive as part of the down payment. This means that the total amount of the loan will be $32,020 - $3200 - $1500 = $27,320.
To calculate the monthly payment, we can use the same formula as before:
P = (r * A) / (1 - (1 + r)^(-n))
For Option B, the monthly interest rate is 5.2% / 12 = 0.04333, the total amount of the loan is $27,320, and the number of months is 36. Plugging these values into the formula, we get:
P = (0.04333 * 27,320) / (1 - (1 + 0.04333)^(-36)) = $825.53
Therefore, the total amount Owen will spend on Option B is:
36 * $825.53 + $1500 = $30,316.08
Therefore, Option A will cost Owen a total of $30,975.98, and Option B will cost him a total of $30,316.08. Therefore, Option B is the cheaper option for Owen.
Explanation: