A car company is offering a choice of deals. You can receive $4,000 cash back on the purchase, or a 0 percent APR, 4-year loan. The price of the car is $40,000 and you could obtain a 4-year loan from your credit union, at 6 percent APR. Which deal is cheaper?
A) The car company's 0 percent 4-year loan.
B) The rebate with the credit union's 6 percent 4-year loan.
C) There is not enough information given to determine which deal is cheaper.

Question

Quizplus · Accepted Answer

The 0 percent APR deal is cheaper because the interest saved over a 4-year loan at 6 percent APR on $40,000 exceeds the $4,000 cash back offer.

A Car Company Is Offering a Choice of Deals