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% down payment of $1,500 [15,000 x .10] and your
loan would be for $13,500 [15,000 1,500]
Your Car
Make
[Ex Toyota]
Ford
Model
[Ex Corolla]
F-250
Price
[Ex - $15,000]
$36,765

Your Financing Requirements
Total Price of Car: $36,765
Down payment: $3,676.50
Amount you will be financing:

$33,088.50


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 ($)
$33,088.50 $33,088.50 $33,088.50
Length of loan - Years 2 years 3 years 5 years
Length of Loan - Months
24 36 60
Interest Rate (%)
2.24% 2.24% 2.84%
Monthly Payment amount ($)
$1,415 $955 $592
Total amount paid over length of
the loan (Monthly payment
amount x the length of the loan
in months)
$33,960 $34,380 $35,520
Total amount of interest paid
over length of car loan. (Total
amount paid minus the amount
to be financed)
$871.50 $1,291.50 $2,431.50
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 the 5 year option because it is the smallest amount
of the three to pay per month.

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% this would decrease the monthly payments but would cause me to wait longer because I
would need to wait until I save enough to make the down payment.

3. Why did you select THIS car (make and model)? Is this purchase a want or a need? Explain. I selected this car
because I have always liked these trucks and I have heard good things about them. This purchase is a want,
because I could have gotten a cheaper 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? Getting this car would be possible with this monthly income would be possible if I
used some of my emergency funds. This wouldnt be a got idea because if I use some of my emergency funds I
wouldnt have it for when I really need it.

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 owing your friend a lot of
money would change your relationship with them.