INTRODUCTION

white carYou are going to buy a car that will need to be financed. You will need to look at different options and decide which will be the best choice for your situation.

You will need to find an advertisement for a car that you would like to purchase. You will hand in a report that details your findings.

TASK

In this lesson you will work side by side with your families to use economic concepts and mathematical calculations in deciding, hypothetically, what car to buy and how to finance the purchase, and work with your family in experiencing this real-life application.

PROCESS

1. Find an advertisement for a car that you would like to purchase. Remember to look at different options and discuss with your parents which car will best suit your needs in your present situation. For the cars you consider, use "Edmunds Car Buying Guide "or "Kelly Blue Book " to learn how the advertised prices compare with market prices generally for cars of the same make, year, and model.

2. After finding the ad for the car of your choice, fill out the SECU Credit Union auto loan application form. Decide whether you will have a down payment or a trade-in. Use realistic values. If you don’t want to put down actual information, you may make it up. Your job could be the job you have now or a future job. (NOTE: this is a classroom activity and do not fax or send in your assignment to the Cascade Bank)

3. Once you have found the automobile of your choice and have determined the amount you will be spending on the car, you need to calculate the monthly payment. The "Amortization Calculator " may be helpful in calculating the monthly payments according to the amount of borrowed principal.

Calculate the monthly payment for your car for each option below using the monthly payment formula (neatly handwritten).

Loan

Interest Rate

Length in Years

I

8%

5

II

9.75%

3

III

10.25%

4.5

IV

18%

2.5

V

22.25%

4

4. Provide a word processed summary of your project. Tell what you think your best loan option would be, and justify that conclusion. Also, discuss what situations might make you decide not to take each of the following:

  • The lowest interest rate
  • The smallest monthly payment
  • The shortest time
  • The loan with the lowest cost

As part of your written summary, include what you have learned from this project.

5. Final Report! The following information must be included in your final report:

  • Evaluation sheet
  • An ad for the car of your choice
  • A completed loan application
  • Monthly payments for each option calculated by using the monthly payment formula (neatly handwritten).
  • Total cost of the loan for each option (monthly payment multiplied by number of payments-neatly handwritten).
  • Printed copy of an amortization schedule of the loan option that is best for your situation
  • A word processed summary of which is the best loan option for your situation along with a justification of why. A summary of what you learned from this project should be included in the written summary.
  • A completed decision making grid

CONCLUSION

cars After completing this lesson, you will have an understanding of the process of buying an automobile via financing.

Food forethought: How might this process work if you were to lease an automobile? How would sales tax, insurance, and licensing fees affect the total cost of purchasing an automobile?

ASSESSMENT ACTIVITY

Self Evaluation Rubric: A rubric that will be used to evaluate your project.

EXTENSION ACTIVITY

Utilize a spreadsheet to check your written calculation for monthly payments and total cost of the loans. Visit this website for a free auto loan calculator for excel.