Reference no: EM133326196

Question: Assume that Brad has managed to pay off his credit card and no longer has a required minimum monthly payment of $250. All other expenses remain the same. Refer to Brad's personal cash flow statement that you developed in Part 1. Recompute his expenses to determine whether Brad can afford to:
a. Purchase the new car
b. Lease the new car
c. Purchase the condo
d. Purchase the car and the condo
e. Lease the car and purchase the condo

Brad is interested in purchasing an SUV for $25 000, which includes all fees and taxes. He still owes $10 000 on his three-year-old sedan, which has 87 000 kilometres on it, and has found a buyer who will pay him $15 000 cash. This would enable him to pay off his current car loan and still have $5000 for a down payment on the SUV. He would finance the remainder of the purchase price for four years at 8 percent, compounded monthly. Anticipating your objections to purchasing the SUV, Brad has an alternate plan to lease the SUV for three years. The terms of the lease are $400 per month, a $0.35 charge per kilometre over 24 000 kilometres annually, and $1200 due upon signing for the first month's lease payment and security deposit.

Brad would also like to purchase his condo. He can make the purchase with 10 percent down. The total purchase price is $140 000. A mortgage with a five-year term and a 25-year amortization period is available with an annual interest rate of 6 percent, compounded semi-annually. The CMHC insurance premium does not need to be added to the mortgage because Brad will pay for it separately. Closing costs due at signing will total $3100. The property taxes on his condo will be $1800 per year, his condo fee is $70 per month, and his household insurance will increase by $240 a year if he buys the condo. Heating costs should be about $125 per month.