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[answered] MM255 Business Math and Statistical Measures Unit 4: Instru


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The price of the used car is $21,000. Sales tax on this car is 9.5% of the price of the vehicle. You intend to finance the entire cost of the car and sales tax, less a down payment of $2,500. You intend to finance the car for 48 months and your car payment will be $471.99 per month.

Your essay should in include the following information

1. Calculate and discuss the amount financed, the installment price of the new car, and the finance charges you will pay over the life of the loan.

2. Compare and contrast the advantage of paying cash and financing the vehicle over a shorter period of time, as well as, the impact of finding lower interest rates.

3. Research and discuss the advantages of having good credit versus poor credit when qualifying for a loan. Discuss the implications of your credit score on the interest rates you may qualify for.

Your essay should be complete and cover each point as outlined above. Be sure to include at least one text citation.



MM255 Business Math and Statistical Measures

 

Unit 4: Instructor Graded Assignment

 

Interest and Loan Calculations

 

Unit 4 focus on interest and loan concepts, which is covered in your reading of Chapter 12:

 

?Consumer Credit.?

 

For this Assignment you will write an essay to address the requirements described below. Your

 

essay must be carefully planned and written using well-constructed sentences and paragraphs.

 

Make sure that your grammar and spelling are correct. Points will be awarded for content as

 

well as composition. Your essay must be a minimum of 1 page in length with standard 1 inch

 

margins and is required to have at least one reference from a reliable source. This means that

 

you cannot use sites like Wikipedia, Ask.com?, and Yahoo? answers and that only references

 

from reliable sources will earn points. All resources should be cited both as an in-text citation as

 

well as being listed on a reference page in APA format.

 

Assignments must be submitted as a Microsoft? Word? document and uploaded to the

 

Dropbox for Unit 4. Include your essay directly in this document following the instructions.

 

All Assignments are due by Tuesday at 11:59 p.m. ET of the assigned unit.

 

Essay Assignment (40 points)

 

Your Assignment is to write an essay discussing the financing of a new car for your business.

 

The price of the used car is $20,000. Sales tax on this car is 8.4% of the price of the vehicle.

 

You intend to finance the entire cost of the car and sales tax, less a down payment of $1,500.

 

You intend to finance the car for 48 months and your car payment will be $455.12 per month. MM255 Business Math and Statistical Measures

 

I am purchasing a new vehicle for my business. After several days of searching for the

 

right car, I have decided on a Kia Sorento priced at $20,000. The sales tax on the car is 8.4%

 

which brings the total installment amount of the car to $23,345.76 ($455.12)(48)+$1,500.00.

 

After putting down a payment of $1,500.00 this brought my amount due at the time of signing to

 

$21,845.76. I plan to finance the car for 48 months and figured out that my car payments would

 

be $455.12 ($21,845.76/48)

 

If I were to have the luxury of paying cash for the vehicle not only would I save money in

 

the long run, I would not have to deal with finance charges. ?Without a doubt, cash is the most

 

straightforward way to pay for your new car. With no interest to pay on loans, it?s also the

 

cheapest.? (Tarry, 2012) If I did not have this type of money to pay upfront, I would need to

 

consider the refinancing route. I would prefer doing a shorter term financing in order to avoid

 

high finance charges over the course of the installment loan. I would definitely want to research

 

different types of loans in order to get the lowest interest rates possible and therefor having the

 

lowest monthly payment that I can get. I found a great example on why keeping your terms down

 

to 3 years or less will save you money in the long run. If you had a $20,000 loan with a rate of

 

7.9% and financed the loan over seven years and monthly payments of $308.02 the total cost of

 

the loan would be $25,873.68. ?However payments of $401.97 a month reduce the term to five

 

years, saving $1,755.48 in interest and bringing the total cost to $24,118.20.? (Tarry, 2012) If

 

you could cut the term to three years and, ?while repayments jump to $623.29, you?ll see the

 

overall cost fall to $22,438.44.? (Tarry, 2012) You will often to that the shorter the financing

 

term, the greater choices you have in loans and a lower interest rate. MM255 Business Math and Statistical Measures

 

The benefits of having good credit versus poor credit when qualifying for a loan includes

 

several items. When you have good credit your chances of getting approved for a loan is greater.

 

Also, having good credit typically helps in getting a lower interest rate and therefor saving you

 

money. ?Having a good credit report enable you to borrow more money at better interest rates.

 

Why? Because the banks know that based on your credit history you are a responsible

 

person.?(Woolsey, 2005) When it comes to purchasing a car, if you have poor credit, you will

 

only qualify for high interest rates and a larger down payment on a vehicle is typically required.

 

?This can mean you pay thousands more for the same car compared to someone with good

 

credit.? (One other interesting fact is many insurance companies now factor in your credit score

 

when figuring out your premium payments. So the better your credit score, the lower your

 

premium payments will be. Having good credit is beneficial in many areas and if you have a

 

lower credit score there are many options out there to help repair and rebuild your credit rating.

 

Although having a good credit score is important in obtaining any type of financial assistance,

 

?many banks are still willing to give loans to individuals with poor credit. If your credit is

 

damaged, you will have to provide more documentation for your loan.? (Goodrich, 2012) If this

 

is the case, you will more than likely always have a higher interest rate. You can work on

 

repairing your score by making car and house payments on time. MM255 Business Math and Statistical Measures

 

Work Cited Goodrich, R. (2012, November 8). 5 Reasons to Have Good Credit - TopTenREVIEWS.

 

Retrieved January 13, 2016, from http://prepaid-debit-cards-review.toptenreviews.com/5reasons-to-have-good-credit.html Tarry, L. (2012, February 20). What's the best way to buy a new car? Retrieved January 13, 2016,

 

from http://www.moneywise.co.uk/cut-your-costs/drive-commute/what-s-the-best-wayto-buy-new-car Woolsey, B. (2005, August 20). Good vs. bad credit: Why is this important? Retrieved January

 

13, 2016, from http://www.creditcards.com/credit-card-news/bad-credit-good-creditdefinitions-1265.php

 


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