Reference no: EM132960720
Samuel and Grace Paganelli want to replace their 2008 Ford? F-150 pickup, which Samuel drives for work. They already own two? vehicles, but need to replace? Samuel's truck because it has nearly? 175,000 miles on the odometer. The replacement must be a vehicle that fits his job as a? self-employed electrician.
- Samuel knows that he drives a lot on the job and is worried about the? high-mileage penalty on many? leases, as well as the fees for excessive wear and tear.? However, Grace is more concerned about the depreciation loss on a new truck purchase than the mileage penalty and would rather lease the new vehicle. She also likes the idea of having a? new, safer truck every few years without the hassle of resale. Samuel also does not like the fact? that, if they? lease, they would not own the vehicle he will use for work. Warranty protection to insure the truck remains in service is very important.
- They feel that they can afford to spend ?$570 per month over 4 years for a new? vehicle, as long as their other associated expenses such as? insurance, gas, and maintenance are not too high. The Paganellis also do not know where to start looking for a vehicle without the hassle of negotiating with dealerships.
Problem a. Identify seven sources of vehicle purchasing information and the type of information available in each source.
Problem b. From all the information? available, what specific information about the different makes and models is the most relevant to Samuel and Grace in making their purchasing? decision?
Problem c. What is the highest price they can pay on the new vehicle if they can afford a down payment of ?$3,700?? Assume they finance their purchase for 48 months at 5.8 percent. ?(?Hint: This is a present value of an annuity? problem.)
Problem d. According to the National Automotive Dealer Association? (NADA) guide found at? www.nadaguides.com, are the Paganellis better off selling their pickup or use it as a? trade-in? Consider both price and time in your answer.
Problem e. If they were to? lease, what key factors are important in a good? lease?
Problem f. Explain to Grace and Samuel the guidelines of leasing and whether or not it is a smart financial move for them to consider. Would they be better off with a? closed-end or? open-end lease? From a purely financial? perspective, would you recommend leasing or? financing?
Problem g. If Samuel purchases a? "lemon", what alternatives are available to prevent the truck from? "short-circuiting" his? business?