You’re looking to buy a 2018 Ford Fusion Titanium with sunroof and leather seats at a price of $32,000. Being a poor college student, you have cash to pay taxes, title, license & fees but your parents offer to give you 10% of the price, $3200, as a down payment and you need to finance the remainder of $28,800. You smartly researched your finance options and got pre-approval at a 3.3% APR for 60 months on your own so you’re not at the mercy at depending on financing from the car dealership. Ford is offering 0% APR financing or $2,750 cash back which would be used as an additional down payment that reduce that amount that you would need to finance. You would use your 3.3% APR pre-approved financing if you elect the $2750 cash back option. Answer the following questions.
3. At what APR would you be indifferent between the two offers? In other words, at what APR would you have the same monthly payment (assuming a 60-month loan term) for the $2750 cash back offer as you would with the 0% APR financing offer?
4. Let’s assume you go with the offer in question #2 (What would be your monthly car loan payment under the Ford’s $2,750 cash back offer and your 3.3% APR pre-approved financing (assume a 60-month loan term)?. Construct an amortization schedule for the loan for all 60 monthly payments. What is your loan balance after 36 months?