I have been considering purchasing a car. There are two methods I use to pay for it:
Method 1: The advertised price is $6,000 but there is a “Zero Percent Finance” offer that the shop has advertised, requiring to pay a 10% deposit followed by 18 monthly payments each of $300.
Method 2 Although the advertised price is $6,000, the salesman has indicated he might be willing to “do a deal” for only $5,400 if I can pay cash. My bank has agreed to lend me enough ($5,400) to purchase this TV and is offering me an 18-month loan with a fixed rate of 6% per annum. The loan is repayable in 18 equal monthly instalments.
How do I figure out which options work out to be cheaper? I think this involves annuity calculations? I worked out the second method to be $314.45 monthly payments after searching up a formula, but I'm not sure if it is right.