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Deciding which car and car loan you can afford


In this simulation activity, students calculate monthly installment loan payments and total costs for three different cars to apply a common strategy for purchasing big-ticket items.

Big idea

Installment loans help people purchase big-ticket items by allowing them to make payments over an extended period of time.

Essential questions

  • How do installment loans help consumers purchase big-ticket items?
  • How does an interest rate affect my monthly payment?


  • Understand how the purchase price, the annual percentage rate of the loan (APR), and the length of the loan affect monthly payment amounts
  • Calculate and compare the monthly costs and total amount paid for three cars that would be purchased using an installment loan

What students will do

  • Calculate the monthly payments on an installment loan using varying principals, interest rates, and lengths of time.
  • Compare cars and car loan options and make a decision given the information provided.
  • Reflect on ways to develop responsible loan practices.

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Teacher guide


Student materials


Note: Please remember to consider your students’ accommodations and special needs to ensure that all students are able to participate in a meaningful way.

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