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One of the largest car dealers in the city advertises a 3-year-old car for sale as follows. Cash price $13,750, or a down payment of $1375 with 45 monthly payments of $361.23. Sharon bought the car and made a down payment of $2000. The dealer charged her the same interest rate used in his advertisement.

1. What is the monthly interest rate?

2. How much will Sharon pay each month for 45 months?

 

 

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Yusra Anees
Yusra AneesLv10
28 Sep 2019

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Related questions

8-39: Frequently we read in the newspaper that one should lease a car rather than buying it. For a typical 24-month lease on a car costing $9400, the monthly lease charge is about $267. At the end of the 24 months, the car is returned to the lease company (which owns the car). As an alternative, the same car could be bought with no down payment and 24 equal monthly payments, with interest at a 12% nominal annual percentage rate. At the end of 24 months the car is fully paid for. The car would then be worth about half its original cost.



(a) Over what range of nominal before-tax interest rates is leasing the preferred alternative?


(b) (b) What are some of the reasons that would make leasing more desirable than is indicated?


8-39: Frequently we read in the newspaper that one should lease a car rather than buying it. For a typical 24-month lease on a car costing $9400, the monthly lease charge is about $267. At the end of the 24 months, the car is returned to the lease company (which owns the car). As an alternative, the same car could be bought with no down payment and 24 equal monthly payments, with interest at a 12% nominal annual percentage rate. At the end of 24 months, the car is fully paid for. The car would then be worth about half its original cost.

(a) Over what range of nominal before-tax interest rates is leasing the preferred alternative?
(b) (b) What are some of the reasons that would make leasing more desirable than is indicated?

So what are the ethics involved with using numbers to make our point even when we know things could be seen differently if we presented it a bit differently? Remember, morals are what we know about right and wrong as individuals, ethics is the systems of formal and informal rules society adopts for the application of morals. (Example, most of us would agree that killing a human is morally wrong, however, the ethical system says it is okay to kill in self-defense, war, and some other situations.)

Yi really wants a car but her credit is pretty poor and she doesn't make much money. Both of those make a new car impossible for her. Instead, she finds a used car seller who offers credit to anyone and a no down payment deal. She knows that they are charging more for the car she wants than what she would pay if she bought it with cash from someone selling their own car but she can get credit. The deal sounds really good. The car is being sold for $9,995 with no money down. Unfortunately, her interest rate is going to be 18% for the five years she has the loan. By law, all of this has to be in the loan document but the salesperson will focus on the no money down, easy credit, and the $9,995 car is much cheaper than what she could get new.

Yet, just with simple interest calculations, Yi's monthly payment will be $253.81 and her total cost for the car will be $15,228.60.

If she simply saved that same payment for four months and put $1,000 down, she would likely qualify for a lower interest rate and could either get a lower monthly payment ($186.72) or she could buy a $13,000 car for the same monthly payment.

Is there a difference between what you're willing to present as ethical to a consumer versus what you would consider ethical if a salesperson did it to you? At what point do you feel unfairly manipulated by numbers? How much should we trust number-based evidence? How do we know we are being manipulated fairly or unfairly?

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