Consider Your Last Vehicle Purchase And Decision Making

Consideryour Last Vehicle Purchase And The Decision Making Process You

Consider your last vehicle purchase and the decision making process you engaged in while deciding what vehicle to purchase or if a new vehicle was the right decision. While analyzing your decision, keep in mind that everything from the interest rates to the price of gasoline is driven by the economy in one way or another. Develop a 1,400-word analysis of your decision-making process in which you include the following: Discuss the role of the interest rate and the cost of financing on your purchase decision. Interest rates are derived from the supply and demand for money and the actions of the Federal Reserve System. What was the rate of interest you paid on your vehicle loan? Were interest rates rising or falling at the time of your decision? Examine the influence of gasoline prices on the choice of vehicle you selected. Gasoline prices rise and fall dramatically based on economic supply of and demand for crude oil. When gasoline prices are low, Americans buy larger, heavier autos, SUVs and pick-up trucks. When gas prices are high, Americans purchase more compact and fuel-efficient vehicles.

When you purchased your last vehicle, were crude oil and gasoline prices rising or falling? Discuss the following in regard to your household at the time of your purchase: Were you employed? Was the economy growing or contracting (recession)? If you were employed, did you take into consideration the risk that you might lose your job if a recession occurred during the period of your loan pay-back? A basic assumption of consumers making purchases of large items requiring financing is that their household cash flow will be adequate to cover the monthly loan payments. For most Americans, this also means assuming continuation of their present wages. But many jobs are sensitive to rises and falls in the business cycle, as witnessed by the 10% unemployment rate of the past "Great Recession." Evaluate the financial trade-offs made when making your purchase. This includes lower maintenance costs for a newer vehicle versus a car payment and higher insurance among other factors. Discuss the influence of any of these Federal or state level programs on your decision to purchase a vehicle; or if these did not factor into your decision, explain why or why not: Buying fuel-efficient vehicles such as flex-fuel, hybrids, and electrics. Converting existing vehicles to use alternative fuels (flex-fuel). Removing old, fuel-inefficient, and high-polluting vehicles from the highways. Explain the influence of environmental factors such as emissions and health concerns on your decision. Discuss the ways in which your purchase illustrates one piece of the circular flow model of economic activity. What are the other parts? Develop conclusions about the economy's influence on personal and business decision making such as purchases, investments, and so forth. Cite a minimum of three peer-reviewed sources. Format your paper consistent with APA guidelines.

Paper For Above instruction

In January of this year, I leased a 2016 Honda Accord, which represented a strategic decision influenced by multiple economic and personal factors. This decision encapsulates the complex interplay between individual preferences, economic conditions, and broader market forces. The leasing choice was primarily driven by the desire to avoid the long-term financial burden and depreciation associated with vehicle ownership, alongside seeking the benefits of a warranty that covers most repair costs during the lease term. Additionally, my decision considered the fuel efficiency of the vehicle, given my daily 20-mile commute each way; this was a significant factor in evaluating the total cost of ownership against operational expenses.

Interest rates significantly impact vehicle financing decisions, affecting the overall cost of a vehicle through monthly payments and total interest paid. At the time of my lease, interest rates were relatively stable and remained at historic lows, a consequence of the Federal Reserve’s monetary policy stance aimed at sustaining economic growth following the downturn caused by the COVID-19 pandemic. The prevailing interest rate on my lease was favorable, which made financing more attractive compared to previous years when rates were higher. According to American Bankers Association data, the average auto loan interest rate hovered around 3% during this period (American Bankers Association, 2023). The low-interest environment reduced the total cost of financing, thereby making leasing a more economically feasible option than purchasing with a traditional loan.

In addition, gasoline prices during the period of my vehicle decision were relatively stable but showed slight fluctuations. The crude oil market was influenced by global supply and demand dynamics, with prices trending neither sharply upward nor downward. As a result, gasoline prices were moderate, encouraging the purchase of fuel-efficient vehicles. According to the U.S. Energy Information Administration (EIA), gasoline prices averaged around $3 per gallon during this period (U.S. EIA, 2023). This stability supported the decision to prioritize fuel efficiency and reliability, knowing that fuel costs would not significantly fluctuate in the near term. If gasoline prices had been rising sharply, I might have reconsidered my choice to lease a smaller, more fuel-efficient vehicle or even explored hybrid or electric options.

At the time of my purchase, the broader macroeconomic environment influenced my household decisions. The economy was on a tentative path of recovery following the pandemic-induced recession, but uncertainties remained. I was employed with a stable income, and my household's cash flow was sufficient to cover monthly lease payments without concern. However, I considered the risks associated with potential unemployment if economic conditions worsened, especially given the volatile nature of job markets during recession periods. The past "Great Recession" exemplified the risks of job loss and financial instability, prompting careful consideration of financial security in such large expenditures (Kuhn & Wolff, 2010).

Financial trade-offs played a significant role in my leasing decision. For instance, leasing a newer vehicle meant lower maintenance costs and access to the latest safety and technological features, compared to buying an older vehicle that might entail higher repair expenses. Conversely, leasing generally results in higher monthly payments than financing an outright purchase, and the vehicle does not accrue equity. Additionally, insurance premiums can be higher for leased vehicles due to their higher value and residual value considerations. My choice balanced these factors, opting for a lease to mitigate the risks of depreciation and maintenance costs while aligning with my financial stability and personal preferences.

Federal and state programs further influenced my decision-making process. For example, government incentives for hybrid and electric vehicles, along with programs promoting cleaner transportation, encouraged consideration of more fuel-efficient and environmentally friendly options. While I did not choose a hybrid or electric vehicle, policies aimed at reducing emissions and promoting alternative fuels contribute to shaping consumer preferences toward cleaner transportation options (Sperling & Cannon, 2020). Moreover, government regulations targeted at removing high-polluting vehicles from the roads indirectly support choices aligned with environmental health concerns, emphasizing the importance of reducing emissions to improve public health and combat climate change.

Environmental factors significantly impacted my vehicle choice. Concerns over emissions and health effects, particularly regarding air pollution and its contribution to respiratory illnesses, motivated me to favor newer, cleaner vehicles. Leasing a vehicle covered by modern emissions standards aligned with my desire to reduce my environmental footprint and adhere to regulations aimed at improving air quality (Janssen et al., 2018). Such considerations are increasingly influencing consumer decisions as environmental awareness grows and regulations tighten.

My vehicle purchase exemplifies the circular flow model of economic activity by illustrating the interaction between households, businesses, government, and the environment. In this case, my household acted as a consumer, purchasing a vehicle from an automaker (business). The transaction generated revenue for the manufacturer, which in turn influences employment, investments, and supply chains. Government policies and programs encourage environmentally friendly vehicles, affecting consumer demand and industry responses. The flow of income and goods continually circulates, fueling economic activity and growth. Other components of the circular flow include household consumption, business investment, and government expenditures, all interconnected through market mechanisms (Mankiw, 2021).

In conclusion, my recent vehicle leasing decision reflects the influence of the economy on individual choices, shaped by interest rates, fuel prices, employment stability, and environmental concerns. The low-interest rates facilitated affordable financing, while stable fuel prices supported the portability and fuel efficiency considerations. Broader economic conditions, including the likelihood of recession and job security, played a crucial role in assessing financial risks. Furthermore, environmental policies and health factors increasingly steer consumer behavior toward cleaner vehicles, supporting sustainable economic growth. These interconnected factors highlight the importance of understanding macroeconomic indicators and policies in personal decision-making processes, demonstrating their pervasive impact on economic activity at both individual and societal levels.

References

• American Bankers Association. (2023). Auto loan interest rates summary. ABA Reports.
• Janssen, N., de Vries, S., & Haverkate, F. (2018). Emissions standards and health impacts of vehicles: A review. Environmental Health Perspectives, 126(5).
• Kuhn, P., & Wolff, J. (2010). The effects of the Great Recession on employment and household stability. Journal of Economic Perspectives, 24(4), 45–66.
• Mankiw, N. G. (2021). Principles of Economics (9th ed.). Cengage Learning.
• Sperling, D., & Cannon, J. (2020). The future of electric vehicles and policy impacts. Energy Policy, 145, 111739.
• U.S. Energy Information Administration. (2023). Gasoline and diesel fuel overview. EIA Reports.