John is shopping for a used car
and has found one being offered by
Alice for $12,000, based on $2,000
down and a $10,000 balance to be
paid to Alice over 36 months at
6% (annual) simple interest paid
monthly on the unpaid balance
(John’s monthly payments would be
$10,000/36 + unpaid balance x
0.06/12).
However, if he pays cash,
he can get a reduction of D dollars so
the cash payment would be $12,000
- D.
Although Alice will finance
the car at 6%, she believes she can better invest her money at 10% elsewhere.
If the 36 monthly payments are discounted to the present at a rate of 10%, how big a reduction in the cash price (to the
nearest dollar) can Alice afford to
give John so that buying the car
for a single cash payment and the
net present value of financing over
36 months (plus $2,000 added to
account for the down payment), are
equivalent propositions?
Assume all
months have 30 days, and a year is
360 days.
Shopping for used cars can be a smart way to save money while still getting a reliable vehicle. Always check the car’s history, mileage, and maintenance records. Take it for a test drive and have it inspected by a mechanic. While many turn to online reviews before buying, it's worth noting how consumer behavior is shaped across platforms. For example, AliEspress vs Temu complaints reveal how customer service and product quality can vary widely—lessons that apply to used car dealerships as well. Do your research, ask the right questions, and shop smart to avoid surprises later.
Shopping For Used Cars: What You Need to Know
