# You are looking into buying a

You are looking into buying a new car and found the one you want for a total purchase price
of \$33,000. The car dealership’s financing office has provided you with the following three
options to finance the car.
• Option A: Finance the total cost of the car at 4.5% annual interest
compounded monthly for 5 years.
• Option B: Finance the car by making a \$4000 down payment and have
annual interest of 2% compounded monthly for 36 months.
• Option C: Lease (that is, rent) the car for 36 months for \$570 per month. At
the end of the lease, the car must be returned. Often with limits on how many
miles you can have on the car.
1). For each option, determine the monthly payments and then the total amount of money
you would pay at the end of each loan term. Create a chart or table to organize your work.
Calculate the total cost of each option.

2).Based on your calculations in #1 above, what do you see as the main differences among
the three options? Which financing option would you choose? Write a 200-400 word
paragraph to clearly explain your reasoning. In your justification, you should discuss (a) the
advantages and disadvantages of each option, (b) how the calculations may have guided your
decision, (c) why others may choose a different option than you.

You’re encouraged to create your own chart.
A sample of chart for your reference:
Future Value \$ Monthly payment \$ Effective rate Interest paid \$ \$ out of pocket
Option A
Option B
Option C

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