STEP 1: Decide on a make and model.
Total purchase price: $7,991
STEP 2: Determine how much money you will need to borrow. Subtract the money you have for a down payment (the amount you give to the dealer on the day of purchase) from the total purchase price. For this exercise, imagine you have saved $5,000 for a down payment. The resulting total is the loan principal; record that amount here and in the chart below.
Loan principal: $2,991
STEP 3: Get quotes from several lenders. The term and interest rate of the loan will vary and both of these factors will affect your monthly payment. (For this exercise, pretend that you have received the rates below.)
STEP 4: Calculate your monthly payments and total amounts paid. Your monthly payment is your principal divided by the number of months in your loan term, and then multiplied by your interest rate.
Next, multiply the monthly payment by the loan term to determine the total amount paid. Record your monthly payments and final amounts paid in the chart below.
Lender Loan Principal Loan Term Interest Rate Monthly Payment Total Amount Paid
Scenario 1 $2,991 36 Months 6.75% $560 $20,160
Scenario 2 $2,991 48 Months 4.75% $295 $14,160
Scenario 3 $2,991 48 Months 5.99% $373 $17,904
Research Your Own $2,991 36 Months 8.57% $712 $25,632
Research Your Own $2,991 36 Months 7.65% $635 $22,860
STEP 5: Decide which loan makes the most sense for you. Which do you think is the best option above? Why?
Scenario two seems to make the most sense to me and it appears to be the best option because the car that I chose was only $7,991 and I would have payed it off by around 24 to 26 months.
Total purchase price: $7,991
STEP 2: Determine how much money you will need to borrow. Subtract the money you have for a down payment (the amount you give to the dealer on the day of purchase) from the total purchase price. For this exercise, imagine you have saved $5,000 for a down payment. The resulting total is the loan principal; record that amount here and in the chart below.
Loan principal: $2,991
STEP 3: Get quotes from several lenders. The term and interest rate of the loan will vary and both of these factors will affect your monthly payment. (For this exercise, pretend that you have received the rates below.)
STEP 4: Calculate your monthly payments and total amounts paid. Your monthly payment is your principal divided by the number of months in your loan term, and then multiplied by your interest rate.
Next, multiply the monthly payment by the loan term to determine the total amount paid. Record your monthly payments and final amounts paid in the chart below.
Lender Loan Principal Loan Term Interest Rate Monthly Payment Total Amount Paid
Scenario 1 $2,991 36 Months 6.75% $560 $20,160
Scenario 2 $2,991 48 Months 4.75% $295 $14,160
Scenario 3 $2,991 48 Months 5.99% $373 $17,904
Research Your Own $2,991 36 Months 8.57% $712 $25,632
Research Your Own $2,991 36 Months 7.65% $635 $22,860
STEP 5: Decide which loan makes the most sense for you. Which do you think is the best option above? Why?
Scenario two seems to make the most sense to me and it appears to be the best option because the car that I chose was only $7,991 and I would have payed it off by around 24 to 26 months.