Discuss the following:
What type of car have you selected, and what will it cost?
The Aston Martin V8 Vantage Convertible is a 2016 model sports car of the luxurious British sports cars lot. With a 430 Horse Power and a fuel capacity of 21.1 Gallons, the V8 Vantage can be perceived as a better deal for an Aston car, given that a convertible of the model goes for $138,195. Car analysts have termed the sports car as the least expensive of the Aston Martin series since the 1980. It is also packed with major attractive features such as its diamond turned 19 inch wheels, exclusively designed sport seats as those of the V12 as well as one of Aston's most famous glass keys among others. The ten year old car has undergone major transitions since its launch in the 1990s and is rival to the new 2016 Jaguar F-Type.
What is the interest rate from your local bank for a car loan for four years?
For a four year new car, the bank rates for auto loans in California stood at 4.04% as of September 16, 2015.
What will your payment be to your local bank, assuming your 10% down payment? Be sure to use the formula provided in Chapter 4 and show your work. How much will that car have cost in four years?
Down payment = 10% of the price of the Aston
10% * $138,195= $13,819.50
Balance= 90% * $138,195= $124,375.50
$124,375.50 will be borrowed from the bank at 4.04% annually
Assuming annual compounding, the payments to the bank made after 4 years will be;
Amount (A) = P (1+r) ^t
=$124,375.50 * (1+4.04%) ^ 4
= $145,725.72
The cost of the car in 4 years will be $145,725.72 + $ 13,819.50
=$ 159,545.22
What will your payment be to the dealership finance company assuming your 10%
down payment? Be sure to use the formula provided in Chapter 4 and show your work. How much will that car have cost in 3 years?
Suppose $124,375.50 was borrowed from the dealership finance company at 10% APR monthly instalments. The Annual Percentage Rate is different from the interest rate. To calculate the amount paid yearly by monthly compounding:
A= P *(1+ APR/ N) ^N*t, where N is the number of periods.
$124,375.50 * (1+10%/12) ^ 36 = $167,680.79
Amount payable = 95% * $167,680.79
=$159,296.7512
Which is the better deal and why?
The dealership finance company deal at 10% APR is a better venture given its cost effectiveness.