Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 43

A car salesman once made the following pitch to one of your authors: ''If you buy this $10,000 car with cash you will lose at least $1,500 over the next 3 years in forgone interest (assumed to be 5 percent per year). If you take one of our low-cost auto loans you only have to pay $315 per month for the next 3 years. That amounts to $11,340-$10,000 for the car and $1,340 in interest. With our car loan you will actually save $160 in interest.'' What do you make of this argument?