L1 Financing Loans for Vehicle Purchases and Leases
Completion requirements
Unit F: Finance
Financing Loans for Vehicle Purchases and Leases
Buying a new or used car from a dealership requires a sizable down payment, additional charges (including taxes), and possibly auto financing. To help prepare for the cost of buying a new or used car, buyers may consider opening a savings account to
set aside funds each month. If a down payment is paid at the time the car is purchased, the car loan will decrease by the amount of the down payment. The higher the down payment, the smaller the car loan. The smaller the car loan, the less interest
will be paid to the lender, which will save the buyer money.
Many people do not have the money saved to buy a vehicle. Often the buyer must obtain a loan from a financial institution. Most vehicle loans are calculated using the simple interest formula that was studied in Math 20-3.
The simple interest formula is I = Prt where P is the principal (the initial amount of loan), r is the annual interest rate (in decimal form), and t is the term in years.
Rather than using the simple interest formula, two payment calculators will be used.
The Monthly Payment Calculator is used to find the monthly payment given the principal, annual interest rate (expressed in %), and the number of monthly payments.
The Number of Monthly Payments Calculator is used to find the number of monthly payments given the principal, annual interest rate (expressed in %), and the monthly payment.
