Apply What You$$ve Learned $-$ Auto Purchase

Scenario: You are in the market for a new car. You do not have a trade$-$in$,$ but you have saved $$3,000$ toward a down payment. You currently earn $$3,500\mathrm{.}00$ gross monthly income, of which $28\%$ is withheld for various deductions. You have heard of the $20\%$ rule of thumb, but want to limit your payments to no more than $16\%$ of your net monthly income because of other debt commitments. You currently have a credit score of $725.$ You expect to drive the car an average $15,000$ miles per year.

You$$re considering purchasing a used$$rather than new$$car$.$ This strategy offers several advantages. Which of the following is not an advantage of purchasing a used car?

A lack of knowledge and confidence in the mechanical condition of the car

Avoidance of the vehicle$$s significant decrease in value due to depreciation

The reduced down payment required for the purchase

The reduced price of the automobile

Which of the following will directly affect the final cost of a new car if you elect to purchase the vehicle? Check all that apply.

The amount of the down payment

The color of the vehicle

The period or term of any loan used to finance the purchase

The number of accidents and traffic citations on your driving record for the past three years

The final negotiated price of the vehicle

Alternatively, after seeing several television commercials suggesting the benefits of leasing a new automobile, you$$ve started thinking about the phenomenon of leasing. Which of the following statements regarding leasing is true? Check all that apply.

If you use an open$-$end lease, you$$ll be required to pay the difference between the vehicle$$s projected residual value and its actual market value.

Customary end$-$of$-$term charges on a lease can include a disposition fee, an early termination charge, and an excess mileage charge.

Leases work best for people who want to drive a vehicle for years and years, and drive at least $30,000$ miles every year.

Leasing can result in lower monthly payments than would be incurred if you purchased the vehicle.

If you elect to purchase the vehicle at the end of the lease period, you$$ll pay the vehicle$$s residual cash value in the event of an closed$-$end lease.

A lease payment is based on four variables. Which of the following is not one of these variables?

The closed$-$end premium

The cost of the vehicle

The money, or lease, factor

The vehicle$$s residual value

Being upside down in a loan is the same as having:

A negative interest rate

Negative equity

Complete the following table to determine your desired maximum monthly payment. $($Round your answers to the two decimal places.$)$

Gross income $($monthly$)$ $

Deductions $($dollar amount$)$ $

Take$-$home pay $

Percentage allotted for car payment

$\%$

Maximum monthly payment $

You have decided to purchase a new car and have negotiated the price. A four$-$year loan is resulting in payments of $$503\mathrm{.}20$ per month. How might you get your monthly payment down to your desired monthly goal? Check all that apply.

Decrease the amount of your down payment

Extend the term of the loan from four to five years

Increase the amount of your down payment

Shop for a loan with a lower interest rate

A good credit score is an important factor when buying a car because it allows you to $(1)$ obtain financing terms, and $(2)$ afford a expensive or better vehicle for the same loan amount.