My First Car - Oconomowoc Schools

My First Car

Assignment Sheet

You were just hired for your first job, but now you need a car to get there. Good news - a relative has offered to lend you money to purchase your first car! Here is the arrangement:

Your relative will charge you the lowest interest rate for car loans that you can find from local lenders.

You have saved $1,500 that you will use as a down payment. You determined that you can spend up to $500 a month on a car loan. The length of your loan must be identified by the number of months in yearly increments (i.e. 12,

24, 36, 48, 60, 72), similar to loans at banks and credit unions. You also determined that the maximum you can spend on a car is $30,000. This project will help you realize how much a car costs after financing. You will research: the cost of your car, what interest rate you will pay, and then calculate your monthly payment and the total cost of purchasing the car with interest. Real-world auto financing in a bit more complex, but this is the first step to understanding the cost of borrowing money. There are two important terms you need to know when you borrow money: principal and interest. The principal is the amount that you need to purchase your car. But banks and credit unions do not loan money for free, they charge interest on the money they lend. Interest is calculated as a percentage of what you owe. The simplest interest is calculated on an annual percentage rate (APR). For example if you borrow $1,000 at a 10% APR, you will owe $1,100 at the end of one year.

P X R X T = I Principal x Interest Rate x Time = Interest owed $1,000 (principal) x 10% per year (rate) x 1 year (time) = 100 (interest)

_________________________ Schlemmer, Phil. (1999). Challenging Projects for Creative Minds. Minneapolis, MN: Free Spirit Publishing Inc.

My Big Decision

1. Use to decide what kind of new car you want to buy and how much it costs. a. Use for specifications, to read reviews, and to save a picture of your car. The price for your car can be found under "pricing options." Use the "target price" for the model you select. Be sure you are within your budget of $30,000 including sales tax. b. CarSoup, , is another great resource for specifications, pictures, and pricing information.

Taxes?

2. You will need to pay sales tax on your car. To find the sales tax rate for Waukesha County, visit and scroll down to the county sales tax rate chart. You are looking for the total tax which includes state, county, and stadium taxes. Remember that the cost of your car, including sales tax, cannot exceed $30,000.

Can I Afford It?

3. Record information in your spreadsheet like the one below: a. Titles: Enter a title in column A and press Enter. To bold face and center your title highlight columns A through B and select Merge and Center from the Alignment formatting menu. Bold the title and change the size to 14 point. Type the make, model and color of your car in row 2, Merge and Center the cells. b. Purchase Price of Car: Enter the price of the car you selected in Cell B4. c. Sales Tax: Enter the sales tax in Cell B5. d. Total Cost of Car Formula: In Cell B6, type a formula to compute the principal: =(B4*B5)+B4 e. Down Payment: Enter the amount of your down payment: $1,500. f. Amount You Need to Borrow: In Cell B8, type a formula to compute the total amount you will need to borrow: =B6-B7

4. Length of Loan (in months): Enter the title for "Length of Loan" in cell A10; enter the length of the loan as 12 months. You will need to adjust the length of the loan later.

5. Next you will need to find the best interest rate to finance your car. Visit and enter your zip code to compare local rates. Select either a new or used car loan for 48 months and scan the results for the best rate.

6. Record this information in your spreadsheet like the one below:

7. Enter a title for Monthly Payment in cell A14, and then enter the formula to determine the monthly payment in cell B14. To enter the formula be sure you are in cell B14: a. Go to Formulas Tab b. Select Financial, scroll down and click on PMT c. Use your mouse to click in the cells for each function: i. B12 for Rate ii. B10 for Nper (number of payments for the loan) iii. B8 for Pv (amount you will need to borrow) iv. Click OK d. You will need to change your formula by selecting the formula (in the fx window) i. Add a ?(negative) symbol in front of PMT ii. And add /12 after B12 to adjust for 12 payments per year iii. Your formula should look like: =-PMT(B12/12,B10,B8) e. Adjust your length of loan (cell B10) in 12 month intervals (12, 24, 48, 60, 72) so that your monthly payments are no more than $500

What Does It Really Cost?

8. Enter a title for Total Cost of Car with Interest in cell A16, then enter the formula to determine the monthly payment in cell B16. To enter the formula be sure you are in cell B16 and enter: =(B10*B14)+B7

9. Enter a title for Interest Paid in cell A18, then enter the formula in cell B18 to determine the amount of interest paid on the car loan. Be sure you are in cell B18 and enter: =B16-B8

Looking at My Payments

10. Create a bar graph that shows the relationship between the amount you borrowed and the total cost of the car with interest.

11. Use a Chart Layout that includes a main title and y axis title; enter the titles

12. Include Data Labels (Layout, Data Labels) to show dollar values on the bars of your graph

Putting It Together

13. Present your findings. You may use PowerPoint, Publisher, Word, HyperStudio, Inspiration or another technology tool that you are familiar with. Your final project needs to include: a. A picture of your car b. A description of your car c. Reasons you selected that particular car d. Data from your Excel Spreadsheet e. Your graph f. Bullet points or a paragraph explaining what the spreadsheet and graph show including: i. How long it will take to pay off the loan ii. The impact interest has on your loan

14. Format your information in a way that makes it easy for your audience to understand.

Challenge Yourself

If you complete your presentation, work with your spreadsheet to see what if . . .

Your down payment was only $500 Your parents helped you out and you were able to make a down payment of $2,500 Create graphs to compare the amounts you would need to borrow and the total cost of the car.

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