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 [15,000 x .10] and your
loan would be for $13,500 [15,000 1,500]
Your Car
Make
[Ex Toyota]
Hyundai
Model
[Ex Corolla]
Santa Fe Sport 2.0L Turbo (A6) SUV
Price
[Ex - $15,000]
$31,515

Your Financing Requirements
Total Price of Car: $31,515
Down payment: $6,303
Amount you will be financing:

$25,212


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 Wells Fargo Chase Bank
Amount to be financed ($)
$25,212 $25,212 $25,212
Length of loan - Years 2 years 3 years 5 years
Length of Loan - Months
24 months 36 months 60 months
Interest Rate (%)
2.34% 2.9% 1.49%
Monthly Payment amount ($)
$1,076 $732 $436
Total amount paid over length of
the loan (Monthly payment
amount x the length of the loan
in months)
$25,824 $26,352 $26,160
Total amount of interest paid
over length of car loan. (Total
amount paid minus the amount
to be financed)
$612 $1,140 $948
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 3 years at 2.9% because that is the best interest rate
between the three banks

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? No it would not
make me wait longer because the payments would be cheaper than they were before.

3. Why did you select THIS car (make and model)? Is this purchase a want or a need? Explain. This purchase
right now would be a want but in the future after I have a career and family this car would be a need. It is a
family car and safe in any weather conditions.

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? No this car wont be possible I would have under or about one-hundred dollars
left.

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 this offer because if you borrow money from a
friend it could ruin your friendship with them over a car. You have to think what is more important a friend or a
car. Also, if something goes wrong what if you dont have the money to pay them back.