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# Project 2 All About The Cars sample SOLUTION

Name: __________________
Section: _________________
Part 1 Its a New Car!
Car Make and
Model
e.x. Toyota
Corolla
Honda Odyssey
Toyota Sienna

Loan 1
Loan 2

Year

Trim Style

Extra Features

Price

2014

LE

no

\$17,199

2014
2014

EX
LE

No
No

\$29,311
\$28,168

Length of
Loan
36 month
48 month

Rate
4.04
3.75

## Car 1 Honda Odyssey

Monthly Payment
Total Interest Paid
Total Cost of Car
Percent of price in interest

36 month loan
\$865.90

48 month loan
\$658.54

\$1,861.37
\$31,172.37
6.35%

\$2,298.95
\$31,609.95
7.84%

36 month loan
\$832.13

48 month loan
\$632.86

\$1,788.79
\$29,956.79
6.35%

\$2,209.30
\$30,377.30
7.84%

36 Month Loan

48 Month Loan

\$5,772.66
\$5,547.55

\$4,390.27
\$4,219.07

## Car 2 Toyota Sienna

Monthly Payment
Total Interest Paid
Total Cost of Car
Percent of price in interest

Car 1
Car 2

## Choose Which Car you Will Pick and explain why

I would pick the Toyota Sienna. It has similar features to the Honda Odyssey and is cheaper,
which will allow me to save money.
Any explanation would be acceptable here, assuming it is supported as to why

## Part 2 Whats In A Loan?

Which loan would you pick and why?
Student should explain which loan they want and why. Possible answers include:
I would pick loan 1 (36 month) because it is shorter, so I pay less overall interest even
though my monthly payment is bigger
I would pick Loan 2( 48 Months) because it has a lower monthly payment, so I can get a
more expensive car based on my salary, even though it will take longer to pay off
Do you always want to go with the lowest interest rate, regardless of loan length? Why or why
not?
Students need to explain that you do not always go with the lowest interest rate, that you have to
consider the length of the loan because you will pay more interest with a longer loan, so end up
paying more for the car even though the loan rate is less. Students can also talk about fees or
conditions with lower interest loans.

Create a flashy advertisement as if you were the Auto Seller, promoting the car you picked and
the low, low, low monthly payment.

## Part 3 Looking up Close at the Loan

Create an amoritization table (Principle/interest table) for the car and loan that you chose p.241
Sample Table
48
Month
Month
1
2
3
4
5
6
7

Interest
\$88.03
\$86.32
\$84.61
\$82.90
\$81.18
\$79.46
\$77.73

Principle
\$544.84
\$546.54
\$548.25
\$549.96
\$551.68
\$553.40
\$555.13

Balance
\$28,168.00
\$27,623.16
\$27,076.63
\$26,528.38
\$25,978.42
\$25,426.74
\$24,873.34
\$24,318.21

Percent
owed
100
98.06576
96.12548
94.17914
92.22672
90.26819
88.30354
86.33275

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

\$75.99
\$74.25
\$72.51
\$70.76
\$69.00
\$67.24
\$65.47
\$63.70
\$61.92
\$60.14
\$58.35
\$56.55
\$54.75
\$52.94
\$51.13
\$49.31
\$47.49
\$45.66
\$43.82
\$41.98
\$40.14
\$38.29
\$36.43
\$34.56
\$32.69
\$30.82
\$28.94
\$27.05
\$25.16
\$23.26
\$21.35
\$19.44
\$17.52

\$556.87
\$558.61
\$560.35
\$562.10
\$563.86
\$565.62
\$567.39
\$569.16
\$570.94
\$572.73
\$574.51
\$576.31
\$578.11
\$579.92
\$581.73
\$583.55
\$585.37
\$587.20
\$589.04
\$590.88
\$592.72
\$594.58
\$596.43
\$598.30
\$600.17
\$602.04
\$603.92
\$605.81
\$607.70
\$609.60
\$611.51
\$613.42
\$615.34

\$23,761.34
\$23,202.74
\$22,642.39
\$22,080.28
\$21,516.42
\$20,950.80
\$20,383.41
\$19,814.25
\$19,243.31
\$18,670.58
\$18,096.07
\$17,519.76
\$16,941.65
\$16,361.73
\$15,780.00
\$15,196.45
\$14,611.08
\$14,023.88
\$13,434.84
\$12,843.97
\$12,251.24
\$11,656.67
\$11,060.24
\$10,461.94
\$9,861.77
\$9,259.73
\$8,655.80
\$8,049.99
\$7,442.29
\$6,832.69
\$6,221.18
\$5,607.76
\$4,992.42

84.35581
82.37268
80.38336
78.38783
76.38605
74.37802
72.36372
70.34312
68.31621
66.28296
64.24336
62.19738
60.14501
58.08623
56.02102
53.94935
51.8712
49.78656
47.69541
45.59772
43.49348
41.38266
39.26525
37.14122
35.01055
32.87322
30.72921
28.57851
26.42108
24.25691
22.08598
19.90826
17.72374

41
42
43
44
45
46
47
48

\$15.60
\$13.67
\$11.74
\$9.80
\$7.85
\$5.90
\$3.94
\$1.97

\$617.26
\$619.19
\$621.12
\$623.06
\$625.01
\$626.96
\$628.92
\$630.89

\$4,375.16
\$3,755.98
\$3,134.85
\$2,511.79
\$1,886.78
\$1,259.81
\$630.89
\$0.00

15.53239
13.33419
11.12913
8.917168
6.698299
4.472495
2.239736
1.33E-14

What do you notices about the amount of money applied towards the interest each
month? Towards the principle? Why do you think that is?
The amount of interest decreases each month and the amount of principle increases.
Banks want to get the most interest from you as soon as possible, in case you decide to
pay the loan off early, they have still made the most money
What is your loan balance at the end of one year? What percent of the loan do you still
owe at this time?
o Loan Balance - \$\$21,516.42
o Percentage Owed 76%
Two years? Three Years? Four Years (if applicable)?

Year

0
1
2
3
4

Loan Balance
(how much I
still owe)
28,168
21516.42

Percent Owed

7442.29
0

100%
76%
52%
26%
0%

Year
2014 (new car)
2013 (1 year old
car)
2012 (2 year old
car)
2011 (3 year old
car)
2010 (4 year old
car)

Mileage
25
15,000

Car Condition
Excellent
Very Good

Value of Car
24173
20927

30,000

Good

18554

45,000

Good

14644

60,000

Fair

11430

Year

## Value of Used Loan Balance

Car
(how much I
still owe)
24173
28,168
20927
21516.42
\$14611.08
18554
14644
7442.29
11430
0

0 / 2014
1 / 2013
2 / 2012
3 / 2011
4 / 2010

\$14611.08

Create a scatter plot of this information. Make sure to appropriately label, title, and include a
legend.

## Value of Car Vs Money Owed On Car

30000

Dollars

25000
20000
15000
10000
5000
0
0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Years of Ownership

## What does this chart and graph tell you?

Car loses a lot of value within the first year
If you crash your car or lose it at the beginning, you owe more than you would get the
value
If you have a longer loan, the
There is a phrase called upside down in your payment. What do you think that means? Why
would this be a problem?
You owe more than the car is worth
Problem if you wreck the car or you cannot make payments on it anymore

## Part 4 Good Deal or Scam?

Down Payment

Loan Amount

Monthly Payment

0% = \$0

\$25,000

694.25

Required Monthly
Income (if
following 15%
rule)
4628.33

5% = \$1250

\$23,750

659.54

4396.92

10% = \$2500

\$22,500

624.83

4165.5

15% = \$3750

\$21,250

590.11

3934.08

How much of a down payment would you need if your monthly income is
\$4000?
.15*4000=\$600
\$3000?
.15*3000=\$450
\$2000?
.15*4000=\$300

Estimate how much you would have in your savings account after 1 year and show your work. 2
years?
Example Rate: 1.05%
Monthly Payment for 3 year loan of 2014 Toyota Sienna \$832.13
A = PMT * [(1+(APR/n)^nY 1]/(APR/n)
A = 832.13 * [(1+(.0105/12)^(12) 1]/(.0105/12)
After 1 year balance would be: 10033.76
After 2 years - 20173.37
Would this be something you would consider? What would be some benefits or detriments and
why?

## Things they could say:

Could use savings towards a down payment
Not worth it due to low interest rates