Question

Cindy and Jack have always practiced good financial habits, in particular, developing and living by a budget. They are currently in the market to purchase a new car and have budgeted $ 300 per month for car payments. While visiting a local dealership, a salesman, Scott, shows them a car that meets their financial requirements. Then he insists that they look at a much more expensive car that he knows they would prefer. The more expensive car would result in payments of $ 500 per month. In discussing the two cars, Cindy and Jack tell Scott that the only way they can afford a more expensive car would be to discontinue making a $ 200 monthly contribution to their retirement plan, which they have just begun. They plan to retire in 30 years. Scott explains that they would only need to discontinue the $ 200 monthly payments for five years, that is, the length of the car loan. Scott calculates that the $ 12,000 in lost contributions over the next five years could be made up over the remaining 25 years by increasing their monthly contribution by only $ 40 per month, and they would still be able to achieve their goal.
a. Comment on the ethics of a salesperson who attempts to talk customers into spending more than they had originally planned and budgeted.
b. Is Scott correct in his calculation that Cindy and Jack can make up the difference in their retirement by increasing their monthly ­contributions by only $ 40 per month for the remaining 25 years?


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  • CreatedOctober 13, 2015
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