Samuel and Grace Paganelli want to replace their 1996 pickup,which samuel drives for work. They already own two vehicles, but they need to replace samuel's truck because it has nearly 225,000 miiles on the odometer. The replacement must be a vehicle that fits his job as a self employed electrician.
Samuel knows tha he drives a lot on the job and is worried about the high mileage penalty on many leases, as well as the fees for excessive wear and tear. However Grace is more concered about the depreciation loss on a new truck purchase than the mileage penalty and would rather lease the new vehicle. She also likes the idea of having a new, safer truck every few years without the hassle of resale. Samuel also does not like the fact that if they lease, they would not own the vehicle he will use for work. Warrenty protection to insure the truck remains in service is very important.
They feel they can afford to spend $550 per month over four years for a new vehicle as long as their other associated expenses such as insurance, gas, and maintenance are not to high.The Paganellis also doe not know where to star t looking for a vehicle without the hassle of negotiationg with dealerships.
Part 1:
What is the price they can pay on the new vehicle if they can afford a down payment of 4000. assume they finance their purchase for 48 months at 7.5.
Part2:
According to the national automotive dealr association(NADA) guide are the paganellies better off to sell theri pickup or use it as a trade in ? condsider both price and time in your answer.
Part3:
Explain to grace and suamuel the guidelines of leasing and whether or not it is a smart financial move for them to consider. would they be better off with a closed-end or open-end lease? From a purely financial perspective, would you recommentd leasing or financing?