Purchasing a Car Project

Directions: Complete all of the tasks and fill out all the tables below. When completed with the tables, write the
short answers/essay.
It is time for you to purchase your first new car! You have been working hard to save money for your down payment,
and now you have enough money saved!
Your Car
Select the car you would like to purchase. You will be purchasing a new car, so shop around to get the best
price.
a. Suggested (local) websites:
i. http://www.htownhyundai.com/
ii. http://www.hackettstownhonda.com/index.htm
iii. http://www.subaru46.com/index.htm
b. Feel free to look for your own make/model somewhere else!
Your Financing Requirements
You will be using your savings as a down payment (a sizeable, up-front payment) and financing the remainder of
the cost of the car. Your down payment should equal 10% of the cost of the car. Subtract the cost of the down
payment from the amount to figure out how much you need to finance (borrow in a loan).
Example If a car costs $15,000 you would put down a 10% downpayment of $1,500 [10,000 x .10] and your
loan would be for $13,500 [15,000 1,500]
Your Car
Make
[Ex Toyota]
Mercedes Benz
Model
[Ex Corolla]
G-Class SUV
Price
[Ex - $15,000]
$114,200

Your Financing Requirements
Total Price of Car: $114,200
Downpayment: $11,420
Amount you will be financing:

$102,780


Your Loan and Payments
Now you need to gather information about financing.
You must find information about financing your car loan for 3 different lengths of time.
You may use information from the same place to finance your purchase, or a combination of places where you
can obtain financing.
Use the link below for an online loan calculator.
Monthly Loan Payment Calculator
Complete the table below:
Loan #1 Loan #2 Loan #3
Name of Bank
Bank of America Bank of America Bank of America
Amount to be financed ($)
$102,780 $102,780 $102,780
Length of loan - Years 2 years 3 years 5 years
Length of Loan - Months
24 months 36 months 60 months
Interest Rate (%)
10% 10% 10%
Monthly Payment amount ($)
$4,743 $3,316 $2,184
Total amount paid over length of
the loan (Monthly payment
amount x the length of the loan
in months)
$113,832 $119,376 $131,040
Total amount of interest paid
over length of car loan. (Total
amount paid minus the amount
to be financed)
$11,052 $16,596 $28,260
Short Answers
Answer each of these in at least a few complete sentences to get full credit. Un-bold your answers.

1. Now that you have completed the table above, which financing option would you choose? Why would you
choose that particular option be specific!
I would choose the 5 year plan because this plan costs the least per month and it is more affordable.
2. What do you think would happen if you increased your down payment to 20% of the cost of the car? Would
this cause you to wait longer and save more before making your purchase? Why or why not?
This would cause me to save more money before I purchased the car but I would have a lower monthly
payment.
3. Why did you select THIS car (make and model)? Is this purchase a want or a need? Explain.
I selected this car and model because I like them. This purchase is a want because I do need as expensive as a car
I could still get a nice new car for less than have the price of this car.
4. Pretend that you have 3 months of emergency funds saved in the bank, a monthly after-tax salary of $3,000 a
month and average monthly costs of $2,500. Would getting this new car be possible for you? Would it be a
good idea? Why or why not?
3000-2500=500 No, getting this car would not be a good idea because I only have $500 each month to spend
and my monthly car payment would be $2,184 and getting this new car would not be possible.
5. A rich close friend offers to buy the car for you and says you can pay him/her back at 2% interest instead of
the higher interest rate you found. This would be a sizeable financial benefit (perhaps hundreds of dollars).
Why you should decline the offer? Explain.
I would decline the offer because every time I saw this friend I would feel that I owed them something and I
would not want to go out with them knowing that I owed them money. Borrowing money from them would also
become a bourdon on the relationship and your relationship would never be the same.