Best course of action in financing purchase of car

Reference no: EM13972718

Barbara is going to purchase a car for $20,000. She has two financing options: She can finance the purchase through the dealer at 1% for 48 months, with monthly loan payments of $425, or she can take a $2,000 rebate on the purchase price and finance the remaining $18,000 with a 7.5% home equity loan whose monthly payment will be $435. The interest on the home equity loan is deductible; the interest on the dealer loan is not. Barbara is in the 33% marginal tax rate bracket. Determine her best course of action in financing the purchase of the car.

Reference no: EM13972718

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