Question

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Please i need help to solve this problem in Finance

1. Apply What You’ve Learned - Auto Purchase Scenario: You are in the market for a new car. You do not have a trade-in, but you have saved $2,500 toward a down payment. You currently earn $4,000.00 gross monthly income, of which 35% is withheld for various deductions. You have heard of the 20% rule of thumb, but want to limit your payments to no more than 15% of your net monthly income because of other debt commitments. You currently have a credit score of 750. You expect to drive the car an average 15,000 miles per year. You’re considering purchasing a used—rather than new—car. This strategy offers several advantages. Which of the following is not an advantage of purchasing a used car? A lack of knowledge and confidence in the mechanical condition of the car Avoidance of the vehicle’s significant decrease in value due to depreciation The reduced down payment required for the purchase The reduced price of the automobile Which of the following will directly affect the final cost of a new car if you elect to purchase the vehicle? Check all that apply. The period or term of any loan used to finance the purchase The color of the vehicle The interest rate of any loan used to finance the purchase The amount of the down payment The amount of the trade-in on an existing vehicle (if applicable) Alternatively, after seeing several television commercials suggesting the benefits of leasing a new automobile, you’ve started thinking about the phenomenon of leasing. Which of the following statements regarding leasing is true? Check all that apply. Leasing can result in lower monthly payments than would be incurred if you purchased the vehicle. If you select to use a closed-end lease, then you’ll be free from any final payment. That’s why they call it a walkaway lease. Leases work best for people who want to drive a vehicle for years and years, and drive at least 30,000 miles every year. Customary end-of-term charges on a lease can include a disposition fee, an early termination charge, and an excess mileage charge. If you use an open-end lease, you’ll be required to pay the difference between the vehicle’s projected residual value and its actual market value. A lease payment is based on four variables. Which of the following is not one of these variables? The closed-end premium The money, or lease, factor The length (term) of the lease The vehicle’s residual value Why would the credit score used on a vehicle loan differ from that used to purchase a home or furniture? Because lenders making vehicle loans want to rely on a credit score that places greater emphasis on a borrower’s past experiences repaying vehicle loans. Because it allows credit bureaus to sell another type of credit score to their business customers. Complete the following table to determine your desired maximum monthly payment. (Round your answers to the two decimal places.) Gross income (monthly) $ 4,000.00 Deductions (dollar amount) $ Take-home pay $ Percentage allotted for car payment % Maximum monthly payment $ You have decided to purchase a new car and have negotiated the price. A four-year loan is resulting in payments of $490.00 per month. How might you get your monthly payment down to your desired monthly goal? Check all that apply. Shop for a loan with a lower interest rate Increase the amount of your down payment Shorten the term of the loan from four to three years Extend the term of the loan from four to five years A good credit score is an important factor when buying a car because it allows you to (1) obtainbetter financing terms, and (2) afford aless expensive or better vehicle for the same loan amount.

Answer 1

1. Which of the following is not an advantage of purchasing a used car?

Answer: A) A lack of knowledge and confidence in the mechanical condition of the car.

Considering that you are buying a second-hand car it becomes essential to know the mechanical conditions of the car and how much miles does the car has been run. Failure to which may result in huge repair and maintenance bill. It's always better to check the mechanics of the car with someone.

B) Avoidance of the vehicle’s significant decrease in value due to depreciation.

The value of automobile decreases as it passes with ownership. For eg. Suppose a car is worth $6000 with the first owner. The price with the second owner would be $5000. As soon as the car passes with ownership there is a sudden decrease in the value of the asset.

2. Which of the following will directly affect the final cost of a new car if you elect to purchase the vehicle?

The period or term of any loan used to finance the purchase.

As the term increases the interest and the net amount you pay increases.

The interest rate of any loan used to finance the purchase.

The interest rate matters a lot. There are different financing companies with different interest rate and schemes. You must ensure that you select the one with the least interest rate. It would help you to save money.

The amount of the down payment.

The more amount you pay as down payment, the less you have to pay in future and interest on it.

The amount of the trade-in on an existing vehicle (if applicable)

If you own your car outright, the dealership will apply your trade-in amount to your new vehicle. For example, if you purchase a car for $25,000 and the dealership gives you $6,000 for your trade-in, you only need a loan for $19,000. And because the dealer knocked several thousand dollars off the final price of your automobile, you pay less in sales tax.

a.Leasing can result in lower monthly payments than would be incurred if you purchased the vehicle. TRUE

b.If you select to use a closed-end lease, then you’ll be free from any final payment. That’s why they call it a walkaway lease. TRUE

Leases work best for people who want to drive a vehicle for years and years and drive at least 30,000 miles every year. FALSE. (The Miles yo be driven are limited, if exceeded you have to pay more charges)

Customary end-of-term charges on a lease can include a disposition fee, an early termination charge, and an excess mileage charge.TRUE

If you use an open-end lease, you’ll be required to pay the difference between the vehicle’s projected residual value and its actual market value. TRUE

• Lease payment is based on four variables. Which of the following is not one of these variables?

The money, or lease, factor.

Why would the credit score used on a vehicle loan differ from that used to purchase a home or furniture?

Because lenders making vehicle loans want to rely on a credit score that places greater emphasis on a borrower’s past experiences repaying vehicle loans. TRUE

Because it allows credit bureaus to sell another type of credit score to their business customers. FALSE

How might you get your monthly payment down to your desired monthly goal?

A.Shop for a loan with a lower interest rate

B.Increase the amount of your down payment

D.Extend the term of the loan from four to five years

CALCULATION

GROSS INCOME	$4000
LESS: DEDUCTIONS @ 35%	($1400)
TAKE HOME PAY	$2600
ALLOTMENT OF CAR PAYMENTS	15%
MONTHLY PAYMENTS	$390

• How might you get your monthly payment down to your desired monthly goal?

A.Shop for a loan with a lower interest rate

B.Increase the amount of your down payment

D.Extend the term of the loan from four to five years

• A good credit score is an important factor when buying a car because it allows you to

(1) obtain better financing terms