Finance Paper on Dealer Discount With Bank Financing

Finance Paper
Name
Institution
Date
Vehicle
In the case of Dealer discount with bank financing, Bank of America offers loans at 2.69% APR for the new car (dealer) and for 60 months payment with a $ 30,000 loan amount is $534.94 monthly payments. Where, monthly rate is 2.695/12=0.224167% and P= PV/ PVIFA
PVIFA = (1-(1+. 0.224167%) ^-60/ 0.00224167%= 56.0813
P= 30,000 /56.0813 = $534.94
The sales price depends on the money saved compared to the manufacturer's suggested retail price (MSRP) going up to $ 32790 for the Jeep Grand Cherokee. Combined with banking finance this option allows the potential buyer to choose from a network of dealers already pre-screened.
The 0% interest loan from the dealer is viable and the car would cost roughly $ 29,000, with the price range changing depending on the year of manufacture and location of car outlet., and when paying for 36 months the average payment is $ 805 .56 per month.
The current fixed rates for 3 years Multi Year Guarantee Annuity (MYGA) is 2. 10% and for the 5 year MYGA this is 3.20% (Annuity fyi.com). As such, for the four year period the 3.00% will be utilized to calculate the total savings.
One of the leasing options is paying $ 5,139 after signing documents then paying $ 239 per month for two years for a total of $ 10,875, which is $5,139+ (239*24)= $10,875
Choosing a growing future value annuity option where the first payment is $ 7,000, interest rate is 4%, Growth rate per period is 3% and number of periods is 4 years then the future value $31,044.83
FVGA=P [(1+r) n – (1+g) n)]/ r-g
FVGA= $7,000[1+0.04)4- (1+0.03) 4]/ 0.04-0.03= $31,496.19
Paying for the purchase in cash either partially or fully is the cheapest option compared to dealer discount, interest loan from the dealer and leasing. It is necessary to consider the affordability of the vehicle being financed, with the total cost and repayment changes affecting the payments to be made.
Big purchase-laptop
In choosing laptop computers one has to consider the price, specification and brand, and this is a quality product. One may choose going to stress or buying online with the option of direct delivery to homes.
The rent to own option is available for the Apple - MacBook Pro with Retina Display - 13" - Intel Core i5 - 8GB the format is available for $ 60 per week. The option of using the Citi Credit Card need to also been reviewed since the two year warranty cover offered saves roughly $ 200 and there is protection against accidental damage or theft. Besides purchase security there are price protection and return protections when using credit cards in cases where the warrant runs out (credit cards.com 2016).
To save up and pay for the laptop priced at $ 1,150 then one would need to save 115 dollars for 10 months. The option to save up and purchase the computer is viable since this is the cheaper option and price will likely reduce with new versions and new models
Price to pay for laptop $ 115* 10 months= $ 1,150
Using the credit card purchase saves more during holiday seasons and when there are various purchases. When the credit card balance is $ 1,200 and interest rate of 12.56% at monthly payment of 100 it will take 13 months to pay off the debt and the total interest paid is $89.08.
Payment $ 1,200
Interest Rate=12.56%
Number of payments= 13 months
* From the monthly schedule-the interest payment is 12.56 +11.64 +10.72 +9.79 +8.84 +7.89+ 6.92 +5.95 +4.96 +3.97 +2.96 +1.95 +0.92= $89.08.
Saving up the money and paying upfront is cheapest at $ 1,150, while using the credit card incurs charges, while renting indicates that one does not own the laptop and merely uses the machine for time rented.
Dream Vacation
My dream vacation is visiting the island of Fiji with the cost / hotel per person being $ 750, while the cost of air travels to and from Fiji through Nadi and San Francisco using the economy class is $ 1,648 (Fiji airways, 2017). Assuming that extra spending of $ 850, the total amount spent from travelling, accommodation and everyday expenses was $ 3,248.
Without a starting principal and annual addition the total annuity payment will be $ 3.270.64 when the monthly payments is $ 130 at an annual interest rate of 5% for the two year period. The total principal is $ 3,120.00 while the total interest is $150.64
In the first month the end balance is $ 130, and the second month the interest is 5% of 260(130+130)= 0.53
* Subsequently the interest payments are $0.00 +$0.53 +$1.06 +$1.60 +$2.13 + $2.67 + $3.21 $3.75 + $4.30+ $4.85 +$5.39 + $5.95 +$6.50 +$7.06 $7.61+ $8.18 +$8.74 + $9.30 $9.87 $10.44 + $11.01 +$11.59 + $12.16 + $12.7= $150.64
Dream vacation direct costs= $ 850 costs everyday expenses+ 1,648 airfare + $ 750 accommodation= $ 3,248
The monthly payment rate is .5/12= 0.004167
Planning and saving money to pay for the vacation is an effective strategy as the individual will contribute money over time, based on their projected use without incurring. Furthermore, placing the money in any annuity account increases the amount payable in the two year period compared to saving the amount as there is constant growth. This option is effective and considering cash and savings in making decisions on financing is necessary as there may be a need to set aside money for emergency.
College Expense/Loans
There are various sources of financing to cover school fees and expenses including payment using saved cash, from parents, grants, work study programs loans and scholarship/aid. Increasingly, the institutions of higher learning breakdown the tuition fees from other expenses allowing students to us the financial aid calculator to approximate how much money they need to complete their courses. The average college expenses are $ 20,000 for tuition and fees while room and accommodation is $10,400 per year. This figure is likely to go upwards depending on the cost of living and accommodation.
* Working for 4 hours daily at $ 12 per hour and 5 days a week the amount at 40 weeks an year is 4*15*5*40= $ 12,000 per year and in two years this is $ 24,000.
* When compared with an $ 15,000 payment per academic year parental monthly allowance of $ 600 the total amount on an annual basis is $ 15,000+(600*12)= $22,000
The calculated expenses take into consideration the transportation and living expenses that vary more often than the tuition fees. University education is costly more than ever before, the out of state and international students pay more, while students may consider tax planning with their parents and opportunities of tax credits to reduce costs (Beams & Briggs, 2012). Even as the loan option is necessary to access funds when required the cost of payment stretches over years and is repaid with high interest rates, and defaulting on these loans affects the credit score negatively.
Mortgage
For a house of $ 300,000 with an annual interest rate of 3.94%, and down payment of $ 60,000 (20% of the price) and mortgage term of 15 years (180 months) the estimated monthly payment is $1,768.04.
* Present value = $ 300,000-$ 60,000= $240,000
* Monthly Rate=3.94%/12=0.32833%
* Number of periods is 180 months
* Loan payment (P) = PV/ PVIFA= 240,000/135.7433= 1,768.04. per month
When the mortgage has similar terms but is for 30 years the monthly payments are $1,137.51. The monthly payments for the longer period are low, but the total payments are higher at $409.503.60 compared to $ 318,247.20.
* Present value = $ 300,000-$ 60,000= $240,000
* Monthly Rate=3.94%/12=0.32833%
* Number of periods is 360 months
* Loan payment (P) = PV/ PVIFA= 240,000/210.9871= $ 1, 137.51 per month
The 30-year mortgage information, assume after making payments for 20 years, rate of 1% lower,
* Present value $ 300,000
* Monthly rate for the first 20 years=3.94%/ 12=0.32833
* Number of periods is 240 months
* Loan payment (P) = PV/PVIFA= $300,000/ 165.8861= $1,808.47
* Total charge is (1808.47*240- $300,000)=$134,032.86
* Next 10 years
* Monthly rate for the first 10 years=2.94%/ 12=0.245
* Number of periods is 120 months
* PVIFA is 1-(1+0.00245)-120/0.00245= 103.86
* If one uses 3.94% for 30 years one would have paid 1,421.89*360=$511,879. 72, with $ 434,032.86 already being paid in 20 years and the difference is $ 77,846.86, and the lower interest rate lowers the total amount payable
The benchmark rate for the 30 year old mortgages in 2016 was 3.62%, and this was the lowest point compared to four decades ago and the rate for 30 year fixed interest rate loans was 4.16% (The Associated Press, 2017). At 3.94% for both the 15 and 30 year old mortgages the monthly payment is higher at $ 1, 137.51 per month for the 15 year mortgage, but get total amount payable is less compared to the 30 year old period. On the other hand, for the 30 year old mortgage with two rates at 3.94% for 20 years and 2.945 in the next 10 years is lower than 30 year old mortgage at a flat rate of 3.94%
Credit card payment
For $ 5,000, and monthly payment of $235.37 at 12 % the debt is repaid in two years time
Credit card balance- $ 5,000
Interest rate on credit card 12%
Minimum payment 1% of balance
Monthly payment $100
Credit card balance schedule
 

Monthly

 

 

 

 

Balance

Payment

Interest

 

Principle

New Balance

 

 

 

 

 

 

5,000.00

100.00

50.00


50.00

4,950.00

4,950.00

100.00
...