Title: My First Car Purchasing Choices
Course: My First Car - Algebra

Calculating the Dealers Cost

Go to www.kbb.com and look for a new car (sedan). Find the MSRP and the sticker price of your vehicle. Be sure to print out your advertisement or invoice.

Car make and model | MSRP | Sticker Price

Now calculate the dealers cost of your vehicle. Assume the dealer's cost is 85% of base and 90% of all options. (Show the calculations below) does the sticker price seem fair? Justify your answer.

Same Thing with a Sedan

Repeat step 1 with a used sedan (be sure to pick same model and same options) only 4 years older and it has 50,000 miles. According to Kelly's Blue Book, what is the average retail value?

Car Make and Model | Avg. Retail Value

Insurance Quotes

Go to www.statefarm.com to get insurance quotes for both your new and used cars. Please be sure to use all of your actual information. What is your premium? What are your coverage's (Be sure to print out two quotes)

New Car Premium | New Car Coverage | Used Care Premium | Used Car Coverage

The Down Payment

For your new car you will put a down payment of $2000. Go to www.bankrate.com and obtain the current average interest rate for a 3,4, and 5 year loan on a new vehicle.

3 Year Rate | 4 Year Rate | 5 Year Rate

Compounding the Interest Paid

Assuming the loan is compounded monthly, use the following formula to calculate the total price for each loan term (3 years, 4 years, and 5 years.

A=p(1+$$ \frac{r}{n} $$)^nt Where A = amount of loan, r = the annual interest rate (expressed as a decimal, and n = the number of times it compounds in a year and t = the time in years.

3 Year Loan | 4 Year Loan | 5 Year Loan
Total Price After 3 Years | Total Price After 4 Years | Total Price After 5 Years

Monthly Loan Payment

Now calculate the monthly loan payment for each term (3 years, 4 years, and 5 years) using the following formula. You could also use the TI-84 Financial Applications.

m = | A($$ \frac{r}{12} $$)(1+$$ \frac{r}{12} $$)^n _____________________
(1+$$ \frac{r}{12} $$)^n -1

Where m = the monthly payment, A = amount of loan, r = the annual interest rate (expressed as a decimal, and n = the number of months of the loan.

Monthly Payment for a 3 Year Loan | Monthly Payment for a 4 Year Loan | Monthly Payment for a 5 Year Loan
Total Interest paid for a 3 Year Loan | Total Interest paid for a 4 Year Loan | Total Interest paid for a 5 Year Loan

Loan for a Used Vehicle

Repeat this process for the used vehicle. However, you are not putting a down payment of $2000. You are looking for 100% financing.

3 Year Interest Rate | 4 Year Interest Rate | 5 Year Interest Rate

3 Year Loan | 4 Year Loan | 5 Year Loan
Total Price after 3 Years | Total Price after 4 Years | Total Price after 5 Years

Monthly Payment for a 3 Year Loan | Monthly Payment for a 4 Year Loan | Monthly Payment for a 5Year Loan
Total interest paid for a 3 Year Loan | Total interest paid for a 4 Year Loan | Total interest paid for a 5 Year Loan

Two Options

The dealership offers you 2 options. The first option they will give you a 3000 rebate and finance the loan from your bank. The other choice is they will give you 0% financing for 4 years. Which is the better deal? Justify your answer with mathematical and written explanations.