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3.3 Auto Loans and Leases (Due 10/28 SoC)

Last updated 12 months ago
33 questions
Note from the author:
In this lesson, you will learn to:
  • Utilize knowledge and strategies to get the best possible financing terms (that meet their individual needs and budget) for a new or used car
  • Explain the difference between a car loan and lease as well as advantages and disadvantages of each
  • Have a backup plan if they find themselves unable to afford their car payments
Complete the entire document and use complete sentences for full credit.
In this lesson, you will learn to:
  • Utilize knowledge and strategies to get the best possible financing terms (that meet their individual needs and budget) for a new or used car
  • Explain the difference between a car loan and lease as well as advantages and disadvantages of each
  • Have a backup plan if they find themselves unable to afford their car payments
Complete the entire document and use complete sentences for full credit.
Required
20
Imagine your life as an independent adult, after you’ve graduated from school.

Do you have a car? _______

Is the car a need or a want? _______
What kind of car do you envision? _______
If you don’t have a car, how are you getting around instead? _______
Required
10

What is your dream car? Upload a picture.

Required
20

When you wake up from your dream, what car are you really driving?

Financing or Leasing a Car

Let’s say you’ve found the perfect car to buy. Congratulations! However, you probably need to take out an auto loan. Who should you borrow from - a financial institution like a bank or credit union? Or, should you borrow straight from the dealership? Read the section “Financing a Car” of this article to see which option is better for you. Then, answer the questions.
Required
10

How are direct lending and dealer financing similar?

Required
10

Which seems like the better option?

How to Get the Best Auto Loan

Watch the video provided and then fill in the blanks at the right.


Required
5
The larger your down payment amount, the _______ your monthly payments.
Required
5
The higher your credit score is, the _______ your APR.
Required
5
You should shop around for a loan preapproval from a direct lender before going to the dealer because _______.
Required
5
The shorter your term length and the higher your monthly payments, the __________ the total interest you will pay.
Required
5
You __________ tell the dealer the maximum you can pay per month.

Understanding Auto Loan Basics

Read this article to understand the implications of car loans.
Required
10
There are ways to lower your monthly payment (larger down payment or longer term). What are two reasons someone might purposely choose a HIGHER monthly payment?

1. _______

2. _______

Auto Loan vs. Lease

Watch this video and then list out the advantages and disadvantages of a lease.
Required
15
List 3 advantages of taking out a lease on a car.
1._______
2._______
3._______
Required
15
List 3 disadvantages of taking out a lease on a car.
1._______
2._______
3._______

Day 2 10/25/22

COMPARE: Auto Loans

Molly is celebrating her amazing new career and wants to upgrade her junky old car for a shiny new Volkswagen Jetta. She heads to Volkswagen’s website and sees the following financing deals:


Part I: 0% APR sounds PERFECT!

Answer the following questions using the details from the 0% APR offer above. Please round all answers to the nearest dollar.
Required
5

Molly has a $2500 down payment saved for this purchase, and the dealer’s $1500 Cash Allowance will come straight off her total. How much loan does Molly need?


Required
10

How much total interest will Molly pay using this plan?

Required
5

How much will Molly’s monthly payment be if she makes 36 monthly payments? (Note: You don’t need to use the Bankrate calculator from below, because there’s no interest if she takes the first offer)


Required
5

When Molly adds all her payments, how much will the car cost her?

Part II: Maybe the 1.9% is more manageable?

Alright, bet! Look at that monthly payment from Question 2 above. Molly cannot afford the monthly payment using the 0% financing. She opens up Bankrate’s Loan Calculator to see how much she’d pay with the other financing option. Please round all answers to the nearest dollar.
Required
5

Remember that Molly has a $2500 down payment saved for this purchase. The dealer will take the $500 Cash Allowance straight off her total. How much loan does Molly need?


Required
5

Using the Loan Calculator and the 1.9% APR offer, how much will Molly’s monthly payment be?

Required
5

How much total interest will Molly pay using this plan?


Required
5

When Molly adds all her payments, how much will the car cost her using this plan?


Day 3 10/26/22

Part III: Reading the Fine Print

Excited to buy her dream car, Molly rushes into her local Volkswagen dealership. Molly picks out a car, sits down at the financing desk, and hears the following:

“Well, we ran your credit history. You’ve got a really thin file -- just a year’s worth of student loan payments. The deal you saw was for ‘well qualified buyers.’ The best deal we can offer you is 6.6% for 60 months. A little more bad news -- the cash allowance is also based on credit history, so you don’t qualify for $500. That said, you’re excited about a Volkswagen, and I want to see you driving one, so I can do $400 for you!”
Required
5

Molly still has a $2500 down payment. How much loan does Molly need?

Required
5

How much will Molly’s monthly payment be using the Bankrate calculator?

https://www.bankrate.com/loans/loan-calculator/

Required
5

How much total interest will Molly pay using this plan?

Required
5

When Molly adds all her payments, how much will the car cost her?

Part IV: In Summary

Required
20

What valuable lessons did Molly learn about auto financing?

Required
20

Molly desperately wants a Volkswagen Jetta, and this new monthly payment is pretty high again. What suggestions do you have for making her dream become reality?

Day 4 10/26/22

MATH: Depreciation of Car Value

In life, you may not always see things losing value at a steady rate. Often things with a limited lifespan, like many electronics and cars, will lose more value in the first few years and less value as time goes on. This concept is called depreciation and it can be modeled using exponential decay.


Required
3

Example 1: A school purchases equipment to screen print their own athletic uniforms. The equipment initially costs $8,000 and will depreciate at 8% annually. They are told this type of equipment has a lifespan of about 10 years. How much will the screen printing equipment be worth in 10 years when the school anticipates needing to replace the equipment?





Required
10

Part II: Practice Problems
Now that you know how to solve exponential decay equations, let’s see how this looks with a car’s value over time! Complete the following practice problems and show your work in the space provided. Then, write your final solution rounded to the nearest dollar.

Tara just bought her first car in order to commute to college, a used 2014 Toyota RAV4! The value of the car today is $13,000, but will lose 11% of its value each year for the next several years. Down the road, Tara will trade the RAV4 in for a down payment on a newer car. If she trades in her car 4 years from now, how much will it be worth?


Required
10

Tara decides to keep the car for a few years longer. If she decides to trade in her car 8 years from now, how much will it be worth? Write your final solution rounded to the nearest dollar.


Required
10

JaRhondaLynn bought a Nissan Sentra about 4 years ago. Her car depreciates at a rate of 7% annually. The value of her Nissan was $18,701.30. What is the value of her car when now? Write your final solution rounded to the nearest dollar.


Required
10

Maggie’s Ford Expedition was purchased for $38,000. Her car depreciates at a rate of 10% annually. How much will her car be worth 8 years from now? Write your final solution rounded to the nearest dollar.


Required
20

Your friend is selling his family’s old car to save up for a new car! He says, “My parents are letting me sell the old car! They bought it five years ago for $15,000 and the new car I want is $20,000. So I just need to sell the old one and only pay $5,000 out of my pocket to get the new car!” What might you say to him?