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]
Subaru
Model
[Ex Corolla]
BRZ
Price
[Ex - $15,000]
$28,724

Your Financing Requirements
Total Price of Car: $28,724
Downpayment: $2,872.4
Amount you will be financing:

$25,852


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 Subaru 46
Amount to be financed ($)
$25,852 $25,852 $25,852
Length of loan - Years 2 years 3 years 5 years
Length of Loan - Months
24 36 60
Interest Rate (%)
2.34% 0.9% 2.24%
Monthly Payment amount ($)
$1104 $728 $456
Total amount paid over length of
the loan (Monthly payment
amount x the length of the loan
in months)
$26496 $26208 $27360
Total amount of interest paid
over length of car loan. (Total
amount paid minus the amount
to be financed)
$644 $356 $1508
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 .9% interest because I end up paying the
least amount in interest and it is still being paid off over a length of time.

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? If I increased my
down payment to 20% I would not have to wait longer because then the payments each month would be
cheaper because there is less I need to pay off of the total amount.

3. Why did you select THIS car (make and model)? Is this purchase a want or a need? Explain. I selected a 2014
Subaru BRZ because it has 200 hp and 151 lbs of torque, its rear wheel drive and its boxer engine is prone to
making extra power once you add modifications such as boost, intakes and tunes. The BRZ body is also very
aggressive and looks great. Overall it is just a beautiful car, this purchase is a want because if I really needed to I
could purchase a cheap economical car.

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 would not be possible for me to afford on that salary because after my
monthly payments I would only have around a 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. You should decline this offer because borrowing money from a
friend strains a friendship and can ultimately end the friendship