Students will be able to:
- Complete a cost-benefit analysis.
- Evaluate buying a new or used car and understand financing alternatives.
- Identify criteria to make a final car buying decision and evaluate the top two alternatives based upon those criteria.
In this personal finance lesson, students will learn by role-playing in the car buying process.
Write the following paragraph on the board:
Due Diligent Darryl is about to graduate high school and wants to attend the community college outside his city. He’s determined through his research and analysis that it’s in his best interest to purchase a car. What kinds of things should he consider when purchasing a new car?
Start by saying that buying a car is a major purchase, which can be challenging and overwhelming to many people. Ask students to share their answers. Give other answers chichcan include: car buyers need direction and assistance in researching their car buying options, considering financing alternatives, and reviewing how a car purchase will fit into long-term financial plans.
Spark a discussion about purchasing a new car. Ask the students if any of them own their own car, and if they do, have them explain their own experience of purchasing the car. Ask the students questions about their experience by using the questions below:
- Did you have someone help you with the process? If so, who?
- How did you find the car?
- Did you buy it from a dealership, or did you find it online 4. from a private seller, or a site such as eBay?
- What did you learn from the entire process?
Let students know that there are many tools out there to help them purchase a car, like the Car Shopper App. Students will need a device, phone or tablet, to download an app. Direct students to download the Car Shopper, available in iOS or Andriod. Go through the app step by step with the students so they can get a feel for how the app can serve them when searching for a car to purchase.
Next, draw students back to Due Diligent Darryl’s story. This group activity will require students to research the Internet for cars. Write the following on the board:
Due Diligent Darryl has a budget of $3,500 for the purchase of his car. This money must also be allocated for insurance, licensing, taxes, etc. Given Darryl’s budget, it must be assumed that he cannot buy a new car for $3,500. Find two used cars for him to purchase.
Place students in pairs. Print and distribute copies of the Car Comparison Table. Have students work together to research cars and fill-in the handout. Emphasize to the students that they cannot go over their budget. Also, note that they can get creative with their budget. For example, buy a car that’s under their budget and meets the necessary legal requirements, such as insurance and taxes, and use the remainder of their budget for personal additions to the car, such as window tinting, stereo, navigation, etc.
Have the students role play as pairs in front of the class. Their task is to play as if they are in a car buying transaction. One student can act as the seller, and another student can act as the buyer. Have the students practice their negotiating skills, which will help when purchasing a car. Have the students ask important questions before buying the car. Have students use their comparison sheets to help them with negotiating points. Make sure they understand that the buyer is not obligated to buy anything; it is merely an exercise to better prepare them for the real thing.
Ask students to write down a reflection about their research in 1-2 sentences. Have them write down the most important economic concepts involved when buying a car. Have students share their takeaways. Answers can include: budgeting, decision making, opportunity cost, etc. Conclude by saying that buying a new or used car is no easy task, and the process requires research before making any decisions. Through research and applying economic concepts to the process, the student or perspective buyer will feel empowered to get the best deal for their dollar.
Give students access to a computer or tablet that can access and excel spreadsheet. Distribute the file to each student at the start of the activity. Have students use the Car Loan Calculator spreadsheet to calculate what they can afford. Students will enter their income and expenses in order to figure out what they can afford when purchasing a car.