Student number 1- Jeremy- Discussion Post: A recent decision that I had to make recently was to either buy out the lease on my current car or purchase a new one. The parameters that had a level of uncertainty were

  

Student number 1- Jeremy- Discussion Post:

A recent decision that I had to make recently was to either buy out the lease on my current car or purchase a new one. The parameters that had a level of uncertainty were: will I like the new vehicle once delivered from the factory, will the dealership’s appraisal of the current car would change at the time of the trade, how much would the payment change from my current payment, and if there was a payment increase would it be worth the extra cost over the possible maintenance costs for the old vehicle.

The level of uncertainty was different for each parameter. For example, I was reasonably confident that I would like the new vehicle once it was delivered from the factory since it was the same make and model with all the options as the previous car. Therefore, I was certain I would like it and put a deposit down to hold the vehicle when it arrived. There was no risk involved in this part of the decision since the deposit would be refunded if I did not like the car. On the other hand, the most uncertain parameter was if the dealership’s appraisal of the current car would change at the time of the trade. The assessment could change for multiple reasons like damage to the vehicle, excessive mileage, and poor maintenance. Again, there was a minor risk involved since the dealership could decrease the appraisal on the car, changing the cost of the new vehicle.

Regarding the change in payment, a slight increase was expected for the newer year model. However, another parameter that could have influenced the decision was whether an increase in the payment is worth the extra cost over the possible maintenance costs for the old vehicle. According to an article written by Maddy Martin (2016), the average maintenance cost over ten years for a Honda is $7,400, which breaks down to $740 a year or roughly $61 a month. Therefore, if the appraisal meets expectations and the final payment calculation was either lower than or between the current payment of the old car and the $61, there would be no risk in moving forward with the purchase. A warranty would pay for significant repairs, and the dealership covers maintenance costs for three years. Throughout the process, there were levels of risk on parameters that could change the terms of the deal, but there was no overall risk since I could turn down the dealership’s offer and stay with the original vehicle.

Reference

Martin, M. (2016, June 1). The most and least expensive cars to maintain. YourMechanic Advice. Retrieved April 4, 2022, from  https://www.yourmechanic.com/article/the-most-and-least-expensive-cars-to-maintain-by-maddy-martin