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Gary is looking to purchase a vehicle, and sell his own vehicle to upgrade. He sells...

Gary is looking to purchase a vehicle, and sell his own vehicle to upgrade. He sells his own car for $7000 and buys the vehicle for $12750. He owes the bank $5200 for a 36 month personal loan at 14.40%. Is it better for Gary to pay off the personal loan and finance the total amount of the new car at 4.89% for 48 months; or is it better for Gary pay $7000 down on the new car and only finance for $5750 at 4.89%? Evaluate and explain which is the better of Gary’s options.
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Assuming the rates provided are annualised rates Option 1 Pay off Personal loan and finance for the vehicle Month Cash Outflow 5,200.00 Total 5,200.00 $15,243.90 $20,443.90 2,493.90 (12750*4.89%*48/12) 48 S 12,750.00 5 10 Option 2 Down payment of $7,000 for vehicle Month Principle Outflow 7,000.00 5,200.00 Total $ 7,000.00 2,246.40 $ 7446.40 15 16 15200° 14.40%#36/12) 5,750.00 $ 6,874.70 $21,321.10 48 S 1,124.70 (5750*4.89%*48/12) 19 20 21 Conclusion Considring both the options, it is preferable to pay off personal loan and finance the entire amoutn for the vehicle Option 1), due to lo ash outtlow. 23 24 27 29 30 O Type here to search 0734 02-09-2018

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