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Take Action! Determining the Amount of the Loan Buying a car is Investigate Financial
Financing
considered to be
There are many ways to reduce the size of your initial
loan. Having a down payment of cash, trading in an the 2nd largest Before You Shop Literacy
old vehicle, and special dealer incentives can save you purchase you make „ Estimate the price No. 9
thousands of dollars that you don’t have to borrow. following a home. range you can afford
„ I can keep up my good credit Whether you are
history so I can get a better loan This money comes off the top of the purchase price. buying a brand new - know the largest
rate. There are other costs that are added on to the final car, or purchasing payment you can make
purchase price. Depending on your state, you must pay each month.
„ I will research my financing before sales tax on the price of the vehicle before the dealer one used, you may
going to look at cars. need to take out „ Try to save 20% of the
incentives are taken off, or after. You will also need to a loan in order to price of the car before
pay the fees for vehicle registration and some portion buy the car. Auto loans are relatively easy to you buy to serve as the
of the property tax. get. Lenders know they’ll get their money back down payment.

because the loan is backed by the physical „ Know the value of your
Exercise - Calculating Costs
vehicle. If you don’t make the payments, the present vehicle so you
You’ve found the car you want and you’ve got the financing in place. Take a look at the details below and lender will repossess, or take back, the car. Most can sell it or trade it in
determine your expenses and costs. Use the online loan calculator at http://finance.yahoo.com/calculator/ auto loans have a term of 3-5 years. By making for the new car.
loans/det03 to help determine monthly payments. For this example, calculate sales tax after the dealer your payments on time and paying off the loan,
incentives have been taken, and pay the entire property tax for the year. you can begin to establish good credit. As with „ Investigate additional Auto Loans
Purchase price: $25,000. any loan, you will need to provide proof to the costs such as sales
Loan - 3.5% interest on a 48 month loan lender that you have the ability to pay back tax, registration
Down payment: $2,000 the loan. Refer back to F6: Loans & Interest to fees, and insurance
Trade-in: $1,500 as a trade-in see the list of items you need to bring to set premiums
Dealer incentive $5,000 up a loan. You have many different choices to „ You have more

1. What is the actual price of the car before sales tax? _______________ make - from buying new or used, or leasing vs. bargaining power
2. What is the initial amount of the loan? _______________ purchasing. Research your options carefully. if you already have
3. What is your annual expense for taxes, insurance and fees? ________________ before buying your car. financing in place.
4. What is the final cost of the car including interest? _________________
Money Matters

1. $16,500; 2. $18,242.50; 3. $1,177.00; 4. $19,575.50

Disclaimer: 8 A typical car loses 30% of its value during the first year.
Learnovation, LLC’s mission is to empower people to
improve awareness of their own financial situation. 8 Transportation should be no more than 15-20% of your monthly budget
®
©2017 Learnovation , LLC All Rights Reserved. This information is intended to serve as a general Research, Research, Research! Use the Internet to investigate financing
www.learnovation.com guide of financial principles and strategies. It is not 8
intended to address individual financial issues, nor options, car reliability, payment calculations, the value of your existing
should it be taken as legal, financial, or other advice.
car or a used car, insurance costs, etc.