Johnny Minor is 16 years old and he has been working odd jobs since he was about 10. Being unusually industrious, and having inherited some money from an uncle he never knew, he has managed to save enough money to buy the used car of his dreams, which happens to be a classic 1980 Porsche 911 Targa. This particular Porsche model is unusual in that it tends to appreciate in value rather than losing value by the minute. Collectors will pay quite a lot for even beat up cars of that model since just fixing a beat up one up to look presentable can fetch a lot more money than one might have paid for that beat up version of the old car.Johnny first got hooked on this particular model car because his maternal grandfather, Joe Addleman, has one that he has kept in pristine condition. Grandpa used to take Johnny for long drives on the weekends in that car, and every year they would take a trip together to a cabin that his grandfather had in the woods in upstate New York. They always told everyone in the family that the trips were a chance to hike together but the truth is that, beginning when Johnny was 13, Grandpa would take Johnny to deserted old roads let his grandson drive the Porsche.Johnny’s parents are aware both of his desire to buy the Porsche and the fact that Grandpa has been allowing Johnny to drive for three years. They have been upset about this all along because they really don’t think that Johnny exercises very good impulse control. They have no objection to his buying a car, just to his buying a very powerful sports car.They also noticed some time ago that Johnny’s grandfather seemed to be “slipping.” He would forget who was president, what day to was, etc., and so they took him to a neurologist who confirmed that he was very likely in the early stages of Alzheimer’s or some other form of dementia. Knowing that Joe would still be able to live independently for several more years with proper supervision, and not wanting to embarrass him, they quietly went to court and had him ruled incompetent to manage his own affairs. Johnny’s father was appointed his guardian but his parents decided to wait a while before telling Johnny since he was so close to his grandfather that they thought it might have a bad impact on his ability to study for the remainder of the school year.Johnny has been doing some research and has managed to find a car very much like his grandfather’s for $15,000 at a used car lot. He stopped by the lot and looked it over and confirmed that the price really was $15,000. Not only that, but the car dealer is offering special financing “this week only.” Knowing a fair amount about money already, Johnny realizes that because of the low interest rate being offered, taking out the loan would actually allow him to earn more money in interest by keeping his money in the bank than he would pay on the loan.Johnny told his grandfather about the car and his grandfather couldn’t believe his grandson’s good fortune. He said to Johnny, “I’ve been offered $38,000 for my Porsche! Granted, it’s in better shape than the one you’re looking at, but after looking that car over on the used car lot, think the engine and chassis are in really good shape. It just needs a little paint and maybe a replacement driver’s seat to be just like mine! You need to buy that car and I’ll be happy to help you fix it up.”So Johnny heads over to the car dealer on Monday and asks if he can put a deposit down on the car of his dreams to hold it. He has a fake ID with him and uses that to convince the salesman that he is 18 years old. But he tells the salesman that he won’t pass the credit check since he hasn’t had a chance to establish a credit history. So he asks if he can bring his grandfather in to cosign. The salesman tells him that the grandfather would be an acceptable cosigner and that if he wants to reserve the car and the good financing he will have to put $500 down today and close the deal by the end of the week. Johnny hands over $500.00 in cash to reserve the car and walks out of the dealership with a receipt in hand.Calling his grandfather to ask him to cosign Johnny finds that Grandpa is actually away for a couple of days but that he will be back on Thursday. But he tells his grandson that he will be more than happy to cosign on the loan when he gets back so Johnny is really happy – everything is coming together!But on Wednesday Johnny gets a call from the used car dealer telling him that they have gotten an offer for $20,000 on the Porsche and that they plan to take the offer unless Johnny wants to agree to pay the same amount. Johnny is furious and tells the salesman that he better stick to his agreement to sell that car for the price promised.Part 1: Will Johnny be able to get the price he was offered? Discuss how the dealer might get out of the deal?Assume Johnny wins the above battle and Grandpa has come back home.Finally, Thursday has come and Johnny and his grandfather go to the car dealership to get Johnny’s new car. The finance officer does a quick credit check on Johnny and his grandfather and, as expected, nothing shows up for Johnny since he has never taken any credit at this point in his life. But Johnny’s grandfather has an excellent credit rating so the dealership extends Johnny a loan with his grandfather as cosigner. One week later Johnny is driving his car and has a horrible accident. The car is destroyed but, miraculously, Johnny comes out of the accident with nothing but a broken wrist. The next week the repayment coupons show up in the mail and Johnny is scheduled to start making payments on the now-destroyed car in 2 more weeks. Part 2: Will Johnny be forced to make the payments and, if he does not make them, will his grandfather, who cosigned the loan, have to make the payments for him? If either/both of them are able to avoid repayment, will there be any other consequences?
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