Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
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They are considering trading their car in for a newer used vehicle so that Harry can have dependable transportation for commuting to work. The couple still owes $4,770 to the credit union for their current car, or $265 per month for the remaining 18 months of the 48-month loan. The trade-in value of this car plus $1,000 that Harry earned from a freelance interior design job should allow the couple to pay off the auto loan and leave $1,400 for a down payment on the newer car. The Johnsons have agreed on a sales price for the newer car of $23,000. The money planned for tires will be spent for other incidental taxes and fees associated with the purchase.
1. Using the Garman/Forgue companion website or the information in Table 7-2, calculate the monthly payment for a loan period of three, four, five, and six years at 8 percent APR. Round your answers to the nearest cent. Round Monthly Installment Payment for a Loan in intermediate calculations to the nearest cent.
Amanda must decide to buy or lease a car that she has selected. She has negoiated a purchase price of $35,000 and can borrow money from her credit union by putting $3,000 down and paying $751.68 per month for 48 months at 6% APR.
Alternatively, she could lease the car for 48 months at $495 per month by paying $3,000 capitalized cost reduction and a $350 dispostition fee on the car whic is project to have a residual value of $12,100 at the end of the lease.
1. What is the buying dollar cost?
2. What is the leasing dollar cost?
Rebecca is moving away from New York City for her new job, so she must buy a car rather than rely on public transit. The new car she is considering will cost $ 18,000 to buy, $ 1,500 per year to insure, and $ 500 per year for maintenance after the 3-year warranty expires. She would keep the car for 7 years when it will have a salvage value of $ 7,000. She has found a 2-year-old car that is the same model for $ 13,000. The 3-year warranty is transferrable, so the annual maintenance cost of $500 starts in year 2. Because the car is less valuable, insurance is $300 per year less than for the new car. After 5 years, the vehicle will be 7 years old and will have the same salvage value of $ 7,000.Rebecca is ignoring costs for fuel, oil, tires and registration, because the two vehicles will have the same costs. If her interest rate is 9%, how much cheaper is the used car (difference of EAC of two vehicles)
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