4.04 Auto Loans and Mortgages

As you move through your payment schedule on an amortized loan, what will happen to the interest portion of each month’s payment?

1. The interest portion will grow

2. The interest portion will shrink

3. The interest portion will stay the same

4. The interest portion will sometimes grow and sometimes shrink

It’s time for Roxanne to start repaying her student loans, which are amortized over the next ten years. Her first month’s payment due is $396. How much should she expect to owe next month?

1. Substantially less than $396

2. Slightly less than $396

3. Exactly $396

4. Slightly more than $396

You’re debating whether to buy a trendy fall jacket that costs a whopping $200! You have it sitting in your online cart, and you see there’s a “Buy Now, Pay Later” option available for the jacket. Which best describes an example of how that would work?

1. You pay the full $200 now, but they wait a month to send it to you, giving you the chance to cancel, penalty free, if you change your mind

2. You pay $100 right now, you receive the jacket, and you owe $100 more a year later on the anniversary of your purchase date

3. They ship you the jacket now, and you owe four $50 payments, once every 2 weeks, until the jacket is paid in full

4. You reserve the jacket now, you pay as much or as little as you want in each payment, and when you eventually get to $200, they send you the jacket

Antonio has $4000 saved to use for a down payment, and he’s about to buy a car that costs $29,000. How much would you expect his loan principal to be?

1. $4000

2. $25,000

3. $33,000

4. $29,000 x his interest rate

If you were offered two auto loan options with the same principal and interest rate, but one was a 48-month loan and one was a 72-month loan, which outcome below will reflect the impact of that difference in term?

1. The 48-month loan will cost less money overall

2. The 48-month loan will have lower monthly costs

3. The 48-month loan will take longer to pay off

4. The 48-month loan will always be a better choice

Shonda’s mom recommends that she spend a year building her credit history and boosting her credit score before she applies for a loan to buy her dream car, which costs $54,000. Why is that good advice?

1. A good credit score will reduce her down payment

2. A good credit score will reduce her principal

3. A good credit score will reduce her interest rate

4. A good credit score will allow her to pay the full $54,000 in cash

A higher credit score...

1. Will help you obtain a lower interest rate on an auto loan

2. Will help you obtain a higher interest rate on an auto loan

3. Has no impact on the interest rate on an auto loan

A longer term length will make your monthly payment lower and you will pay _______ interest when compared to a shorter term length and higher monthly payment.

Which statement most accurately describes the difference between leasing and owning a vehicle?

1. Leasing is a term used when you purchase a car for the longest term possible

2. Leasing a car is making monthly payments to use a car for a fixed period of time, but then you return it without owning it

3. Leasing is a term used when you take the car for an initial test drive

4. Leasing a car requires a very large down payment, while purchasing a car does not

According to the video, what is the first step in purchasing a new vehicle?

1. Take multiple vehicles for a test drive to see what features you like best

2. Create a budget and check your credit score

3. Get an insurance quote for you new vehicle

4. Decide which color vehicle you want most