BUSN380 Week 6 Assignment - Project # 3 – Car Buying Assignment

BUSN380 Week 6 Assignment - Project # 3 – Car Buying Assignment

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BUSN380 Week 6 Assignment Project # 3 – Car Buying Assignment Car Buying Assignment Deciding on my Budget The maximum amount of money I can spend on a car is $24,000. An evaluation of my finances reveals that I cannot afford to pay cash for my new Toyota Prius, so I intend to seek financing after I raise my credit score to 740, to secure the best car loan rates. I plan to achieve this by paying my bills on time, not maxing out my credit card limits, and fixing any errors on my credit report. To calculate how big of a loan I can afford, I multiply my monthly gross income by 0.36 and subtract that from my regular monthly payments. Thus $3,380 x 0.36 = $1,216.80 $1216.80 – 700 (Expenses) = $516.80 $516.80 is how much I can afford in terms of monthly car loan payments. In the My Estimated Payment Summary below, at a rate of 4.92% and no money down, I can get financing for $437 a month. I know that $0 down presents certain pitfalls, namely being upside down on the loan as soon as I drive the car off the lot. This is because vehicles depreciate rapidly, and the taxes and other fees that go into a new car purchase, are typically rolled into the loan if I don’t put anything down. So if I finance the full purchase price, I will owe more money to the bank or dealership than the vehicle is actually worth; which is bad for selling or trading the car in before the loan is paid off. Since that is the case, I therefore need to consider if it would be worth it to buy a brand new car. Years ago, people bought new for the warranty, but today most vehicles have longer warranties that can still be in effect even if you buy a car that is a few years old. I can even choose to purchase an extended warranty, which is typically far cheaper than the value the car lost in the first year or two. I must take into account all the other ownership costs (insurance, maintenance, etc.,) over a five-year period. Kelley Blue Book works out the five-year cost for this vehicle at $26,172. It calculates the cost per mile based on 14,000 miles driven per year for 5 years. So, 14,000 miles per yr. x 5 yrs = 70,000 mi (total 5-yr cost.) $26,172 / 70,000 mi = $0.37. ($ cost per mile) 1
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Estimate Loan Payments Vehicle Price: $ Down Payment: $ Trade-In Value: $ Sales Tax: % Interest Rate: % Term (Months): Monthly Payment: $ Current Interest Rates Auto loan rates by Bankrate.com New (48 mo.) 4.36% Used (48 mo.) 4.92% My Estimated Payment Summary* Vehicle Price: $18,995 Total Cost: $20,470 Down Payment: $0 Sales Tax: 0% APR 24 mo. 36 mo. 48 mo. 60 mo. 72 mo. 2.5%
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BUSN380 Week 6 Assignment - Project # 3 – Car Buying Assignment

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