Question

Quality Cars, an independent used-car dealership, utilizes long-term consumer credit in its business. Typically, consumers are allowed to place a 15 percent down payment on an automobile. Then, over a period of 48 months, the consumer is allowed to make payments on the balance of the account, which includes compound interest of 2 percent monthly on the unpaid portion. Quality Cars is employing ____ in its business.

Answer 1

Answer: The correct answer is "installment accounts".

Explanation: The quality cars business model implies that customers can pay a reduced percentage of the cash price, and for the remaining balance a financing over 48 months, charging a monthly interest for that balance. Thus Quality Cars is employing installment accounts in its business.