Question

Many college students or new graduates are faced with one of their first "big ticket purchases" of buying a car. One of the first decisions you have to make when looking to purchase a car is to determine if you want to buy a new or used car. This assignment will help you to start thinking about the pros and cons of each.

First, look up a NEW car of your choosing (for example, a 2023 Honda CRV). Next, look up a USED car that is as similar as possible to the new car you just looked up (for example, a 2022 Honda CRV with similar options to the 2023 model you looked up). Answer the following:
1. What car did you decide to look up for this (ex. A Honda CRV EX with AWD)
2. What was the price of the NEW car?
3. What was the price of the USED car?
4. Assuming you could not put anything towards a down payment (the total car price is your PV), what would your monthly payments be for both the new and used car with a 4% interest rate over a 36 month loan?
5. Based on the difference in payment amounts, would you choose to buy the new or used car and why? (3-4 sentence reflection)

Answer 1

When purchasing a car, one needs to decide between new or used, considering factors such as affordability, loan terms, and additional costs like insurance. Example calculations based on the selected model car, interest rate, and loan term would provide insight into monthly payment differences and help inform the purchase decision.

Step-by-step explanation:

When deciding to purchase a car, new graduates and college students often weigh the options between buying new or used vehicles. The choice between a new car and a used car includes considering affordability, loan terms, and other financial obligations such as insurance and maintenance.

If a student were to select a vehicle such as a Honda CRV EX with AWD, they would need to research the prices for both new and used versions of the car to compare. For example, the price of a new Honda CRV might be significantly higher than that of a used 2022 model with similar features.

In the context of a 4% interest rate over a 36 month loan, monthly payments can be calculated for both the new and used car prices, assuming no down payment. The student would then compare the payments and reflect on whether the lower monthly payments of a used car outweigh the benefits of warranty and less wear and tear that come with a new car.

Insurance rates are an additional cost to consider. These rates may vary based on factors like the car's safety rating, the driver's age and history, as well as the vehicle’s history if it's used.