The Johnsons Decide to Buy a Car After several years of riding a bus to work, Belinda finds that she can no longer do so because her employer moved to a location that is not convenient for public transportation. 

Thus the Johnsons are in the market for another car. Harry and Belinda estimate that they could afford to spend about $12,000 on a good used car by making a down payment of $2,000 and financing the remainder over 36 months at a 6 percent interest rate for $304 per month.

(a) Make suggestions about how the $355 might be integrated into the Johnsons' budget (Table 3-6 on page 87) by making reductions in certain expense categories. 

(b) If they cannot make room in their budget for a $355 monthly car payment, would you recommend they finance a vehicle for 36 or 48 months? Why or why not?

(c) Assume that the Johnsons have narrowed their choices to two cars. The first car is a three-year-old Chevrolet with 44,000 miles; it is being sold for $12,500 by a private individual. The seller has kept records of all maintenance and repairs. The second car is a three-year-old Toyota with 51,000 miles, being sold by a used-car dealership. 

Harry contacted the previous owner and found that the car was given in trade on another car about three months ago. The previous owner cited no major mechanical problems but simply wanted a bigger car. The dealer is offering a written 30-day warranty on parts only. The asking price is $12,200. Which used car would you advise the Johnsons to buy? Why?

(d) Would you recommend that they purchase or lease a low-priced new vehicle instead of buying a used vehicle? Why or why not?

 (e) Would you recommend that they purchase or lease a low-priced new vehicle instead of buying a used vehicle? Why or why not?r

 

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Table 3-6 2018 Unfinished Annual Budget Estimates for Harry and Belinda Johnson Yearly Monthly Total Averages Jan. Feb. Mar. Apr. May June July Aug. Sept. Ot. Nov Dec INCOME Hany's salary Belinda's salary 4,080 4,080 4,080 4,080 6,400 6,400 6 400 6,400 4,080 4,080 4,080 4,080 4,080 4,080 4,080 4,080 48,960 4, 080.00 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400 76,800 6400.00 Interest 30 30 30 30 30 30 30 30 30 30 30 30 360 30.00 Income from rust 3,000 3,000 250.00 TOTAL INCOME 10,510 10,510 10,510 10,510 10,510 10,510 10,510 13,510 10,510 10,510 10,510 10,510 129,120 10,760.00 EXPENSES Fixed Expanses Rent 1,600 1,600 1,600 1,600 1,600 300 1,700 1,700 350 1,700 350 1,700 1,600 300 1,700 350 1,700 350 19,800 3,900 1650.00 325.00 Hoalth inurance 300 300 300 300 350 350 ute insurance Home purchase fnd Renters in surance Automobile iurance Auto loan payments Student loan payments Savingslemergencies Harys retiremant plan Bdinda's retremernt plan Cable TVand Intemet Federal income taies 20 20 20 20 20 20 20 20 20 20 20 20 240 20.00 S00 500 500 500 500 20833 2,500 220 220 1833 600 600 1,200 100.00 490 490 490 490 490 490 490 490 490 490 490 5,880 490.00 300 300 300 300 300 300 300 300 300 300 300 300 3,600 300.00 100 100 100 100 100 100 100 100 100 100 100 100 1,200 100.00 195 195 195 195 195 195 195 195 195 195 195 195 2,340 195.00 400 400 400 400 400 400 400 400 400 400 400 400 4,800 400.00 160 160 160 160 160 160 160 1,700 160 160 1,920 20,400 160 160 160 160.00 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700.00 State incometaxes Soda security taxes Automobile registraton S00 S00 500 S00 500 500 500 500 500 S00 500 500 6,000 S00.00 800 800 800 800 S00 800 800 800 800 9,600 300 800.00 25.00 800 800 800 300 Total fixed expenses Variable Expenses 6,565 6,565 6,565 6,565 6,565 7,165 6,715 7,215 7.215 7,515 7,815 83,900 6,991.67 Savings money market Revolving savings tund Food (home) 400 3,000 3,400 283 33 250 250 210 S50 250 1,780 6,600 190 240 200 148 33 190 S50 S50 S50 550 S50 S50 S50 S50 S50 550 550 550.00 Food (out 300 300 300 300 300 300 300 300 300 300 300 300 3,600 300.00 Utlities 2 20 220 110 220 220 220 220 220 220 220 2640 1,320 220 220 220 220.00 Cal phones 110 110 110 110 110 110 110 110 110 110 110 110.00 220 220 220 220 220 220 220 220 220 220 2640 1,200 220.00 Auto gas repars Doctondanis 220 220 100 100 100 100 100 100 100 100 100 100 100 100 100.00 out of pocket Medianes 60 60 60 60 60 60 60 60 60 60 60 60 720 60.00 Cloting and upkoep Chuch and charity 170 170 170 170 170 170 170 170 170 170 170 170 2,040 170.00 100 60 100 100 1,160 1,475 100 100 100 100 100 100 100 100 96.67 Gts 80 80 110 75 140 120 60 60 400 300 122.92 Rublic tamportation Personal allowances Entertairment 160 160 160 160 160 160 160 160 160 160 160 160 1,920 160.00 500 500 500 500 S00 500 S00 500 S00 S00 6,000 1,800 500 500 S00.00 150 150 150 150 150 150 150 150 150 150 150 150 150.00 European vacation 400 400 400 400 400 400 200 200 200 200 200 200 3,600 300.00 200 200 200 200 100.00 41.67 Summer vaca1on Anniversary dnner party Mscellaneos Total variable 200 200 1,200 42 42 42 42 42 42 42 42 42 42 40 40 500 100 100 100 100 3,342 100 6,042 100 100 100 100 100 100 100 1,200 100.00 3,712 3,712 3,702 3,707 3,712 3,742 3,242 3,222 3,380 3,280 44,795 3,732.92 expenses TOTALEXPENS ES Difference (available for spending. saving, investing and danating Revalving savings 10,277 10,277 10,267 10,272 10,277 10,507 10,457 13,477 10,45710,437 10,895 11,095 128,695 10,724.58 233 233 243 238 233 3 $3 33 53 73 385 585 425 385 585 withdrawals Table 3-6 2018 Unfinished Annual Budget Estimates for Harry and Belinda Johnson Yearly Monthly Total Averages Jan. Feb. Mar. Apr. May June July Aug. Sept. Ot. Nov Dec INCOME Hany's salary Belinda's salary 4,080 4,080 4,080 4,080 6,400 6,400 6 400 6,400 4,080 4,080 4,080 4,080 4,080 4,080 4,080 4,080 48,960 4, 080.00 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400 76,800 6400.00 Interest 30 30 30 30 30 30 30 30 30 30 30 30 360 30.00 Income from rust 3,000 3,000 250.00 TOTAL INCOME 10,510 10,510 10,510 10,510 10,510 10,510 10,510 13,510 10,510 10,510 10,510 10,510 129,120 10,760.00 EXPENSES Fixed Expanses Rent 1,600 1,600 1,600 1,600 1,600 300 1,700 1,700 350 1,700 350 1,700 1,600 300 1,700 350 1,700 350 19,800 3,900 1650.00 325.00 Hoalth inurance 300 300 300 300 350 350 ute insurance Home purchase fnd Renters in surance Automobile iurance Auto loan payments Student loan payments Savingslemergencies Harys retiremant plan Bdinda's retremernt plan Cable TVand Intemet Federal income taies 20 20 20 20 20 20 20 20 20 20 20 20 240 20.00 S00 500 500 500 500 20833 2,500 220 220 1833 600 600 1,200 100.00 490 490 490 490 490 490 490 490 490 490 490 5,880 490.00 300 300 300 300 300 300 300 300 300 300 300 300 3,600 300.00 100 100 100 100 100 100 100 100 100 100 100 100 1,200 100.00 195 195 195 195 195 195 195 195 195 195 195 195 2,340 195.00 400 400 400 400 400 400 400 400 400 400 400 400 4,800 400.00 160 160 160 160 160 160 160 1,700 160 160 1,920 20,400 160 160 160 160.00 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700.00 State incometaxes Soda security taxes Automobile registraton S00 S00 500 S00 500 500 500 500 500 S00 500 500 6,000 S00.00 800 800 800 800 S00 800 800 800 800 9,600 300 800.00 25.00 800 800 800 300 Total fixed expenses Variable Expenses 6,565 6,565 6,565 6,565 6,565 7,165 6,715 7,215 7.215 7,515 7,815 83,900 6,991.67 Savings money market Revolving savings tund Food (home) 400 3,000 3,400 283 33 250 250 210 S50 250 1,780 6,600 190 240 200 148 33 190 S50 S50 S50 550 S50 S50 S50 S50 S50 550 550 550.00 Food (out 300 300 300 300 300 300 300 300 300 300 300 300 3,600 300.00 Utlities 2 20 220 110 220 220 220 220 220 220 220 2640 1,320 220 220 220 220.00 Cal phones 110 110 110 110 110 110 110 110 110 110 110 110.00 220 220 220 220 220 220 220 220 220 220 2640 1,200 220.00 Auto gas repars Doctondanis 220 220 100 100 100 100 100 100 100 100 100 100 100 100 100.00 out of pocket Medianes 60 60 60 60 60 60 60 60 60 60 60 60 720 60.00 Cloting and upkoep Chuch and charity 170 170 170 170 170 170 170 170 170 170 170 170 2,040 170.00 100 60 100 100 1,160 1,475 100 100 100 100 100 100 100 100 96.67 Gts 80 80 110 75 140 120 60 60 400 300 122.92 Rublic tamportation Personal allowances Entertairment 160 160 160 160 160 160 160 160 160 160 160 160 1,920 160.00 500 500 500 500 S00 500 S00 500 S00 S00 6,000 1,800 500 500 S00.00 150 150 150 150 150 150 150 150 150 150 150 150 150.00 European vacation 400 400 400 400 400 400 200 200 200 200 200 200 3,600 300.00 200 200 200 200 100.00 41.67 Summer vaca1on Anniversary dnner party Mscellaneos Total variable 200 200 1,200 42 42 42 42 42 42 42 42 42 42 40 40 500 100 100 100 100 3,342 100 6,042 100 100 100 100 100 100 100 1,200 100.00 3,712 3,712 3,702 3,707 3,712 3,742 3,242 3,222 3,380 3,280 44,795 3,732.92 expenses TOTALEXPENS ES Difference (available for spending. saving, investing and danating Revalving savings 10,277 10,277 10,267 10,272 10,277 10,507 10,457 13,477 10,45710,437 10,895 11,095 128,695 10,724.58 233 233 243 238 233 3 $3 33 53 73 385 585 425 385 585 withdrawals

Answer rating: 100% (QA)

a calculate the rate they are paying for the financing We can use this information for another part ... View the full answer