Sangster Math, June 9, 2022

 Different scenario:

Car = $3500

1.13 x T = 48 x N + D (down payment)

 

a) What if you increase your down payment to $1075.  How many months will it take to pay off the car?

1.13 x T = 48 x N + D (down payment)

1.13 x 3500 = 48 x N + 1075 (down payment)

3955 = 48 x N + 1075

3955 – 1075 = 48 x N

2880 = 48 x N

2880/48 = N

60 = N (it takes 60 months to pay off the car)

60 months = 5 years

 

Original down payment

1.13 x 3500 = 48 x N + 643 (down payment)

3955 – 643 = 48 x N

3312 = 48 x N

3312/48 = N

69 = N (it takes 69 months to pay off the car)

 

 

 

 

 

 

 

 

b) What if you increase your monthly payment to $144,  keeping the same down payment.  How many months will it take to pay off the car?

 

1.13 x T = 144 x N + D (down payment)

1.13 x 3500 = 144 x N + 1075 (down payment)

3955 = 144 x N + 1075
3955 – 1075 = 144 x N

2880 = 144 x N

2880/144 =N

20 = N

 

 

 

 

 

 

 

 

 

c) What if you lower your monthly payment to $36.  How many months will it take to pay off the car?

 

 

- is this a good idea to take so long to pay off a used car?  Why?

(remember, you have to spend 5+ years to pay off the used car)

-       It is a bad idea to take too long to pay for an used car

-       (1) when a car is more than 8 years old, there are a lot of mechanical problems

-       (2) you will end up spending more money to repair it

-       (3) worth very little for a car that is 8+ years old

 

General idea: 

-       Japanese cars (Toyota, Hondas, Lexus, Acura, Nissan, Mazda) are good for at least 8 years without problems

-       Domestic cars (Ford, GM, Chrysler) are good for 3 to 5 years without major problems

-       European (BMW, Mercedes, Audi, VW) are good for 3 to 5 years. Very expensive to repair

-       Electric cars or Hybrid vehicles – (battery is good for about 8 years, cost $20000 to replace the battery)

 

Right now, there are a lot of “Buy now and Pay later” companies

NOBODY

-       What’s wrong with this no down payment, buy now pay later case?

-       (1) you buy things they cannot afford

-       (2) if the money is not paid back on time (within a year), very high interest will be charged (Best Buy charges 30% interest) 

-       (3) Vacation companies (Air Canada), initial fee $3000 for a week, $5000 within a year with charges