Car Buying Activity When buying a car, most people cannot afford to buy it for the sticker price. Usually, people take out a car loan. Buyers will pay an initial payment (down payment) on the car that will be paid to the car dealer. The rest of the money will be financed from a car loan. Research current available cars and finance offers. Decide on a new car you would like to purchase. Copy and paste the URL of the site here: Car make, model and year: Sticker price: You will be making a down payment of 10% for the car. Find 10% of the sticker price and fill it in here: The remainder of the cost is what you will be financing (we are ignoring tax, title, and license for this activity). Subtract your down payment from your sticker price and write down your amount to finance here: You will need to find the current interest rates available for new auto loans. Look at banks, dealerships, credit unions, etc. We will assume you will not be able to get a 0% interest loan from a dealer, so do not select that option. Decide on the rate and time period you will use for this project. Copy and paste the URL of the site here: Complete the following info: You are borrowing $ to purchase a vehicle. You will repay the loan with equal monthly payments over compounded monthly. years at % interest a. What is your monthly payment? Show your formula used and work to set it up. b. Create a balance sheet for the first 6 payments. Period Payment Interest Balance *i Unpaid Balance Reduction (payment toward principal) PMT - Interest Unpaid Balance (previous balance - principal payment) 0 1 2 3 4 5 6 c. What is the total of all payments made? d. How much interest was charged? e. What if you could get a shorter term loan (if you picked 5 years, calculate 4 years instead. If you picked 4 years, calculate 3 years instead)? What is your monthly payment, total of all payments, and interest charged now? Years used now Monthly payment Total of all payments Interest charged under new terms f. Give two reasons someone might want to choose a longer term loan. g. Give two reasons someone might want to choose a shorter term loan. Car Buying Activity When buying a car, most people cannot afford to buy it for the sticker price. Usually, people take out a car loan. Buyers will pay an initial payment (down payment) on the car that will be paid to the car dealer. The rest of the money will be financed from a car loan. Research current available cars and finance offers. Decide on a new car you would like to purchase. Copy and paste the URL of the site here: Car make, model and year: Sticker price: You will be making a down payment of 10% for the car. Find 10% of the sticker price and fill it in here: The remainder of the cost is what you will be financing (we are ignoring tax, title, and license for this activity). Subtract your down payment from your sticker price and write down your amount to finance here: You will need to find the current interest rates available for new auto loans. Look at banks, dealerships, credit unions, etc. We will assume you will not be able to get a 0% interest loan from a dealer, so do not select that option. Decide on the rate and time period you will use for this project. Copy and paste the URL of the site here: Complete the following info: You are borrowing $ to purchase a vehicle. You will repay the loan with equal monthly payments over compounded monthly. years at % interest a. What is your monthly payment? Show your formula used and work to set it up. b. Create a balance sheet for the first 6 payments. Period Payment Interest Balance *i Unpaid Balance Reduction (payment toward principal) PMT - Interest Unpaid Balance (previous balance - principal payment) 0 1 2 3 4 5 6 c. What is the total of all payments made? d. How much interest was charged? e. What if you could get a shorter term loan (if you picked 5 years, calculate 4 years instead. If you picked 4 years, calculate 3 years instead)? What is your monthly payment, total of all payments, and interest charged now? Years used now Monthly payment Total of all payments Interest charged under new terms f. Give two reasons someone might want to choose a longer term loan. g. Give two reasons someone might want to choose a shorter term loan
