Why do Toolbox Manufacturers Charge High Interest Rates and Mechanics are willing to pay for them? The high interest rates of toolbox financing provide benefits for the manufacturing company and the mechanics. The company increases their net income and the mechanic receives financing, convenience and the name brand. We have all been there. We walk into the garage of our mechanic’s shop, taking a quick glance; we see the huge elaborate toolboxes that each mechanic owns. Most of them are from Mac, Matco or Snap-On. Unless you work in the tool industry most people do not realize what the real cost of each of these boxes is. The average toolbox costs a minimum of $4,500 and can run up to $9,500 for just one component of the set. The Big Three toolbox companies in the industry are Mac, Matco and Snap-on and all are using outrageous interest rates depending on state requirements. The rates vary from 6.25% all the way up to 22.50% in most states. So how much does that toolbox really cost if a mechanic makes weekly payment for the whole term of the contract? A $4,500 dollar contract as the principle balance at 22.50% interest while paying $32.71 a week for 208 weeks (4 years) will cost a total amount of $6,803.68. That is over $2,000.00 in interest. Looking at a $9,500 dollar contract at 22.50% interest while paying $69.06 a week for 208 weeks, will cost a total amount of $14,364.48. That is almost $5,000.00 in interest! Looking at this scenario from a company’s perspective, there has to be a point of competitiveness. Each manufacturer offers in-house financing for mechanics that are interested in buying their product. Due to many mechanics having little or damaged credit, the companies are taking a financial risk by financing them. Considering that for every 100 contracts the company buys 2 will default on the loan. There is a 2% chance of default on a loan. Each company buys 300 contracts on average per day, approximately 78,000 contracts annually which means that 1,500 will more than likely default. The rate of interest on the company’s part is determined by an estimate of how much money will be lost. If the interest income from these rates makes up approximately 35% of each company’s net income, then the total amount of interest income would be 37% from these contracts. 1 For the company, the benefit of bringing in a 35% net income outweighs the cost of a 2% loss of interest income. The other point of view, the mechanic’s, involves three solutions to this question.
There will come a time when the car a person owns will need some necessary maintenance, or something breaks and has to be replaced. Labor rates for auto repairs have skyrocketed, with rates averaging from $100-$138 an hour. (Roth, 2011) If a repair is complex enough, that hourly rate may not be a factor, but with some repairs, a person may find that the labor costs are a lot more expensive than the part that is being replaced. I...
o The remaining $125,000 up front charge would not be owed until ICEDELIGHTS provided one acceptable location and the lease was signed
a. The cost of debt is the money company has to pay for using the funds. In our case, annual cost of debt is kd: kd/2 = r = 5.0%. kd/2 = (47.5 + [1000-891] / 30) / ((2*891 + 1000) / 3) = 5.5% We have to multiply t...
Established in 1949,Cutco is proud of their American roots in up-state Olean, New York. Personally, I like to help people and make their lives better in someway. One of the major reasons I had joined Vector was because of Cutco’s philosophy of aiding others, by giving back to their customers through providing the best possible deals imaginable. For instance, their Forever Guarantee, that actually last forever. If anything were to happen to your Cutco, you could send it back to the factory and the company would fix or replace it free. If at any instance a tool in your set needed to be sharpened, you just need to pay for shipping and it will be sharper and shinier than ever. If you damage your tools through misuse, it will be replaced with a brand new one for only half the retail price. Lastly, there is the fifteen-day trial or what I like to think of it as “the Intelligent Thinker’s Guarantee”, when you the customer get to experience Cutco for half a month. If for any reason at all that you are not satisfied with your Cutco, you can send it back for a full refund. I have never heard of a company that has deals lasting for an eternity. This deal is unparalleled to other
“New Data Confirm Troubling Student Loan Default Problems.” Project on Student Debt: Home. N.p., n.d. Web. 29 Oct. 2013. .
Ford’s impressive total asset size is $225 billion (Ford, 2015a). The fixed assets turnover ratio (FATR) illustrates the effectiveness of using fixed assets to generate sales. Ford’s average fixed asset turnover ratio for 2013-2015 is (0.33 for 2015 + 0.32 for 2014 + 0.28) / 3 = 0.31 (Ford, 2015a; Ford, 2015c). Although the number is small, one can compare Ford’s FATR with a competitor during the same period to determine which one uses their fixed assets better. GM’s average FATR for the same period was (0.28 for 2015 + 0.18 for 2014 + 0.14 for 2013) / 3 = 0.2 (GM, 2015a, GM, 2015c). Therefore, one can conclude that Ford’s usage of fixed assets was more productive than GM’s. I will give GM some credit, because of their increasing
Assessing the capital structure of any firm is important for investors attempting to determine if...
only make up 16.7% of the capital structure. Thus, the credit risk for any credit commitment was not too high
In “Bank Debt” alternative, a sum of $3.5 million will be injected to the company through bank loans. However, the company will have to pay an additional amount of $33,750 in interest and a principal payment of $300,000 to the bank annually over the course of 7 years. Net income will come to $489,187.50 and EPS will be 0.49.
The present situation of the company shows that ideas, Late Mr. McFettridge had, are not implemented properly. Miller Tool Company may have become a favourite investment spot for Financial Institutes, but the reality is quite different. The company needs to sort out a number of matters in the coming future.
ii. A company borrows £2,000,000 in 1998, with a fixed interest rate of 8%, payable annually for a 5 year period.
Have you ever wondered why it cost you hundreds of dollars to get a belt changed on your car? The answer is simple: Auto-repair fraud. According to Norris and Engel’s book Auto Repair Fraud, the number one consumer complaint in the country is auto repair fraud. Americans pay more than 29 billion dollars a year to service and repair vehicles. According to a three year U.S. Senate sub-committee investigation into the auto repair industry, one-third of all car repair dollars, ten-billion dollars a year, is wasted on inadequate, inept, or corrupt service.
The Net Present Value (NPV) is a Discounted Cash Flow (DCF) technique that relies on the concept of opportunity cost to place a value on cash inflows arising from capital investment, where opportunity cost is the "calculation of what is sacrificed or foregone as a result of a particular decision".
When you are an individual or an expert, and you have to buy a screwdriver set for use, there are a few variables you ought to consider. The explanation for remembering this is to ensure that you select just the best screwdriver set for your requirements. The market is stuck with various brands offering distinctive quality and value run. You might need to consider every one of the makings of a decent screwdriver set with the goal that the choice procedure is less demanding. Presently let us dive further and talk about all the significant data relating to screwdriver
Barra Airways has an interest coverage ratio (ICR) of 18; this means that Barra Airways is not burdened with a large amount of interest payments on existing debts. Therefore, using debt does appear to be an attractive source of finance. This is because Barra Airways existing interest burden is low, meaning that to increase it would have a reduced effect on the company’s net profit. However, EasyJet has an ICR of 30.88, considerably larger than that of Barra Airways [5]. Lenders may look at this data and conclude that Barra Airways is a riskier company to lend too than others in the same industry; this will result in a higher interest rate on any debt taken out.