Car Loan Project
Each student will buy (hypothetically) a car that will need to be financed. The student will need to look at different options and decide which will be the best choice for his situation. The student will need to find an advertisement for a car that he would like to purchase. Each student will hand in a report that details his findings.
KEY CONCEPTS
Choice, Decision Making, Opportunity Cost
STUDENTS WILL
 Use economic concepts and mathematical calculations in making hypothetical decisions about buying and financing a car.
 Work with their families in experiencing this reallife application.
INTRODUCTION
Tell the student that they are going to buy a car that will need to be financed. The students will need to look at different options and decide which will be the best choice for their situation.
The students will need to find an advertisement for a car that they would like to purchase. The students will hand in a report that details their findings.
RESOURCES

Edmunds Car Buying Guide: This web site features both new and used car prices and also gives (under Tips and Advice
) excellent discussion of leasing versus buying, and whether to tradein a vehicle or sell it yourself.
www.edmunds.com/

Kelley Blue Book; The Trusted Resource: This web site features "blue book" valuesthat is, prices you may expect to find when shopping for a used car from a dealer.
www.kbb.com/kb/ki.dll/ke.kb.sp?kbb&&&usedCars;slp

Amortization Calculator: Use this form to calculate repayments, for principal and interest, on a loan taken out for a given time period and interest rate.
www.bretwhissel.net/amortization/amortize.html

SECU Credit Union: An Automobile Loan Application that the students can use to apply for a loan as a classroom activity.
www.secumd.org/uploads/VehicleLoan.pdf

Auto Loan Calculator: Students can use this auto loan calculator for excel during the extension activity.
www.vertex42.com/Calculators/autoloancalculator.html

Decision Making Grid: Students will use this decision making grid worksheet in their final report.
www.econedlink.org/lessons/docs_lessons/386_DecisionMakingGrid1.pdf

Self Evaluation Rubric: Students will fill out this rubric before turning in their projects to make sure they have included everything.
www.econedlink.org/lessons/docs_lessons/386_studentevaluationrubric1.pdf

Car Loan Rubric: This will be the final rubric used to grade the students projects.
www.econedlink.org/lessons/docs_lessons/386_CarLoanRubric1.pdf
PROCESS
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 

Have your students find an advertisement for a car that they would like to purchase. Remember to look have the students look at different options and discuss with their parents which car will best suit their needs in your present situation. For the cars that they will consider, have the students 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. Edmunds has both new and used car prices and also gives excellent discussion of lease versus buying and whether to tradein a vehicle or sell it yourself.

After finding the ad for the car of their choice, have the students fill out the SECU Credit Union auto loan application form
. Make the students decide whether they will have a down payment or a tradein. Tell the students that they need to be sure to use realistic values. Also remind them that they don’t have to put down actual information, they may make it up. Your job could be the job you have now or a future job.(NOTE: this is a classroom activity and remind your students to not fax or send in your assignment to the Cascade Bank.)

Tell the students that once they have found the automobile of their choice and have determined the amount they will be spending on the car, that they need to calculate the monthly payments. Explain to the students that the "Amortization Calculator
" may be helpful in calculating the monthly payments according to the amount of borrowed principal.
Have the students calculate the monthly payment for their car for each option below using the monthly payment formula (neatly handwritten). 
Have the students provide a word processed summary of their project. Have the students explain what they think their best loan option would be, and to justify their conclusion. Also, discuss with the students what situations might make them decide not to take based on the following:
 The lowest interest rate
 The smallest monthly payment
 The shortest time
 The loan with the lowest cost

Explain to the students that the following information must be included in their final report:
 Evaluation sheet
 An ad for the car of their 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 paymentsneatly handwritten).
 Printed copy of an amortization schedule of the loan option that is best for their situation
 A word processed summary of which is the best loan option for their situation along with a justification of why. A summary of what the students have learned from this project should be included in the written summary.
 A completed decision making grid
ASSESSMENT ACTIVITY
Self Evaluation Rubric: A rubric that will be used to evaluate your project.
Car Loan Rubric: A rubric that should be used to check and make sure the students turned in all their items.
CONCLUSION
Tell the students that after completing the lesson, they will have an understanding of the process of buying an automobile via financing. Food for thought: How might this process work if they were to lease an automobile? How would sales tax, insurance, and licensing fees affect the total cost of purchasing an automobile?
EXTENSION ACTIVITY
Students could utilize a spreadsheet to check their written calculation for monthly payments and total cost of the loans. Students could also use the evaluation activity to keep track of their progress. Visit this link for a free auto loan calculator for excel.
EDUCATOR REVIEWS

“What an excellent project! I did this project with my 8th grade technology classes. They were completely engaged throughout the entire project. Their final reports came out beautifully. I will make this a permanent part of my 8th grade curriculum.”

“Great idea and very useful!”

“This is a great activity. I already started one carbuying activity, but got stuck on calculating. I am going to use your guide presented here. Thanks.”

“This is a really cool project for high school students. It's fun to learn about and it's an amazing lesson to complete!”

“This is a nice lesson.”

“Excellent! Prepares the student for the world ahead.”

“This is a very nice project for older grades like 812. It will help them in the future.”

“I can't wait to try this in my life connections class!”

“I love your activities, but I can't call up the forms on my MAC. I want to do the car loan activity, but the sheets I need to call up online are just black. EconEdLink: It should work now. Thanks for your comment.”

“I think I will alter this lesson for my current car needs and have my students find a car for me as a research project. I will actually buy the car they think is my best option!”