Elizabeth Frost

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]
smart
Model
[Ex Corolla]
Passion cabriolet
Price
[Ex - $15,000]
$18930

Your Financing Requirements
Total Price of Car: $18,930
Downpayment: $1893
Amount you will be financing:

$17037


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
PNC PNC PNC
Amount to be financed ($)
$17037 $17037 $17037
Length of loan - Years 2 years 3 years 5 years
Length of Loan - Months
24 months 36 months 60 months
Interest Rate (%)
2.24% 2.24% 2.24%
Monthly Payment amount ($)
$727 $490 $490
Total amount paid over length of
the loan (Monthly payment
amount x the length of the loan
in months)
$17,448 $17,640 $29,400
Total amount of interest paid
over length of car loan. (Total
amount paid minus the amount
to be financed)
$451 $603 $12,363
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 probably choose to pay the two year loan because you dont end up paying a lot more than you took out
a loan for in the end. Even though the monthly payment is more, the total payment is much less than the other
options.

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?
You would have to wait longer to save your money but your interest rate might be lower as the model year gets
older rather than buying a brand new car and you wouldnt have to pay as much because there is less money to
be paid.

3. Why did you select THIS car (make and model)? Is this purchase a want or a need? Explain.
This purchase is a want. It is a much nicer car rather than just a car that will get you where you need to go. The
reason I chose this car was because I really like that it is better for the environment and it is nice and small. It
would definitely help me decrease my carbon footprint.
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 would not be possible for me because my monthly the monthly payment would be more than what I
could afford after all my average monthly costs. It would not be a good idea because it would put me in a lot of
debt.

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.

You should decline the offer because it might make you feel guilty, you could get into arguments with this
person and it would change your relationship with that person. Its not very good idea to let friends pay for
things or ask your friends for money.