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You are in need of a car. After much research you have decided to purchase a new 2023 Toyota Camry. The list price for the car at the local dealership is $25,945 including tax, title, and license. When you visit the dealership the finance manager provides you with three purchasing options. Option A: 5.64% APR, compounded monthly, for 72 months with $0 down at the time of purchase Option B: 0% APR, compounded monthly, for 48 months with $1000 down at the time of purchase Option C: 5.49% APR, compounded monthly, for 60 months with $5000 down at the time of purchase For each purchasing option, compute - the required monthly payment, - the total amount you will have paid for your car, and - for the first loan payment, how much money will go towards interest and how much money will go towards the outstanding balance? Option A Option B Option C Then use your work to justify which is the best financial option for you, assuming you paid off the car according to the terms of the loan.

User Nembleton
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Final answer:

Option B, which offers 0% APR for 48 months with $1000 down, is the best financial choice as it results in no interest costs, although it has higher monthly payments. Option A and C involve interest payments, with Option A being the most expensive in the long-term and Option C offering lower monthly payments than B but with interest costs.

Step-by-step explanation:

When deciding on the best financial option for purchasing a new 2023 Toyota Camry, it is important to calculate the monthly payment, the total cost by the end of the loan, and the interest versus principal of the first payment for each option.

Option A: 5.64% APR for 72 months with $0 down will have higher interest costs over the life of the loan than options with higher down payments or lower APRs. Option B: 0% APR for 48 months with $1000 down is the best option in terms of total interest paid (which would be $0), but the monthly payments will be higher. Option C: 5.49% APR for 60 months with $5000 down will have lower interest costs than Option A but higher than Option B, and the monthly payments would be lower than Option B but higher than Option A.

Based on these considerations, if one can afford the higher monthly payments, Option B is financially the best, as it saves all the interest cost which would be paid in the other options. However, if monthly cash flow is a concern, Option C may strike a good balance between down payment, monthly payment, and total interest cost.

User Reddish
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