Hot Wheels Project

Kyle Gold

Introduction

I have a $100,000 annual salary, and have decided to spend it on the 2015 Ford Fusion. This car will cost a total of $25,000 before interest. After interest, the car will cost a total of blank. The rest of my income will be spent on paying for my house, taxes, food, medical insurance, financial savings, as well as anything else I may need.

Annual and Monthly Budget

Payment Groupings

$100,000 Income

Housing: (Yearly-$35,000.00, Monthly-$2,916.67)


Taxes: (Yearly-$25,000.00, Monthly-$2,083.33)


Food: (Yearly-$15,000.00, Monthly-$1,250.00)


Transportation Total: (15%)

  • Car Payment: (Yearly-$10,000.00, Monthly-$833.33)
  • Other Car Bills/Interest: $5,000.00, Monthly-$416.67)


Savings: (Yearly-$5,000.00, Monthly-$416.67)


Medical Insurance: (Yearly-$3,000, Monthly-$250.00)


Other: (Yearly-$2,000, Monthly-$166.67)

Car Payments-What Can I Afford

3 Years

P=833.33(1-(1+.0375/12)^-12(3)/.0375/12)
1+(.0375/12)=1.00312

1.00312^-12(3)=.89375

1-.89375=.10624

.10624/(.0375/12)=33.99868

33.99868*833.33=28,332.12

$28,332.12


4 Years

P=833.33(1-(1+.0375/12)^-12(4)/.0375/12)

1+(.0375/12)=1.00312

1.00312^-12(4)=.86111

1-.86111=.13888

.13888/(.0375/12)=44.44310

44.44310*833.33=37,035.91764

$37,035.92


5 Years

P=833.33(1-(1+.0375/12)^-12(5)/.0375/12)

1+(.0375/12)=1.00312

1.00312^-12(5)=.82951

1-.82951=.17048

.17048/(.0375/12)=54.55360

54.55360*833.33=45,461.26547

$45,461.27

Monthly Payments

3 Years:

25,000=R(1-(1+.0375/12)^-12(3)/.0375/12)

1+(.0375/12)+1.00312

1.00312^-12(3)=.89375

1-.89375=.10624

.10624/(.0375/12)

33.9868

25,000=33.99868R

25,000/33.99868R=735.32257

$735.32 (In the budget)


4 Years

25,000=R(1-1.0375/12)^-12(4)/.0375/12)

1+(.0375/12)+1.00312

1.00312^-12(4)=.86111

1-.86111=.13888

.13888(.0375/12)=44.44310

25,000=44.44310R

25,000/44.44310R=562.51700

$562.52 (In the budget)


5 Years

25,000=R(1-(1+.0375/12)^-12(5)/.0375/12)

1+(.0375/12)=1.00312

1.00312^-12(5)=.82951

1-.82951=.17048

.17048/(.0375/12)=54.55360

25,000=54.55360R

25,000/54.55360R=458.26489

$458.26 (In the budget)

Extra Credit Problem

Mrs. O’Connell wants to buy a new car that costs $24,516.00. The car dealership is offering 0% interest for a 5 year loan. They also offer a $4,000 rebate instead of 0% financing with 3.75% interest. Help Mrs. O’Connell determine which is the better deal? Show work and justify your answer.


$4,000 Rebate

20,516=R(1-(1+.0375/12)^-12(5)/.0375/12)

1+(.0375/12)=1.00312

1.00312^-12(5)=.82951

1-.82951=.17048

.17048/(.0375/12)=54.55360

20,516=54.55360R

20,516/54.55360R=376.07050

$376.07 Per Month


0% Interest

24,516=R(1-(1+0/12)^-12(5)/0/12

24,516^12(5)=408.6

$408.60 Per Month

Extra Credit Explanation

Mrs. O'Connell would be wise to take the $4,000 rebate over the 0% financing. With the rebate, Mrs. O'Connell will pay $376.07 a month as opposed to paying $408.60 a month with the 0% interest. Over the next 5 years, she will save $32.53 each month by taking the rebate deal over the no interest deal. By taking the rebate deal, Mrs. O'Connell will save a grand total of $1,951.80 over the next five years.