Assignment
Assignment Overview
For this assignment you will use the internet to research and select an automobile to purchase and finance. There will be some assumptions made about this activity. There are many factors to consider when buying an automobile. The following article will give you a good overview of the automobile purchasing/financing process. Please remember the cost of your automobile is not only the purchase cost but also auto insurance, gasoline and repair and maintenance. All factors should be considered when making your decision to purchase an automobile.
Instructions
STEP 1: KNOW YOUR BUDGET – HOW MUCH CAN YOU AFFORD TO SPEND ON AN AUTOMOBILE? The scenario will be that you have determined you can afford an automobile that cost no more than $35,000. You have $10,000 in savings to go toward this automobile. Therefore, the highest loan amount you could have is $25,000.
STEP 2: RESEARCH AUTOMOBILES (CONSIDER WHETHER YOU SHOULD CHOOSE NEW OR USED) AND SELECT ONE. Use website www.truecar.com
STEP 3: CALCULATING PAYMENT. Once you have an automobile selected and you know the price, you will then need to calculate the monthly payment amount. Go to the Auto Loan Calculator. Remember the monthly payment is affected by the interest rate, amount of loan (principal) and length of loan.
You will enter the amount of the loan, then the term of the loan. (36 months, 48 months and 60 months into the Auto Loan Calculator. The interest rates are given in the tables. It is the average car loan rate for the given term of the loan.
You will also calculate the Total Financing Cost of the Automobile Purchase and the Total Interest Paid.
For each of the loan terms you can find the Total Cost of the Purchase by using the following formula:
Number of payments x payment amount = Total Financing Cost of Automobile Purchase
The Total Amount of Interest Paid can be found using the following formula:
Total Financing Cost of Automobile Purchase – Original Loan Amount (principal) = Total Interest Paid
Total Cost of Automobile = Total Financing Cost + Down Payment (in this case $10,000
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