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?
Objectives
- 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.
Download activity
Teacher guide
cfpb_building_block_activities_deciding-which-car-loan-afford_guide.pdf
Student materials
cfpb_building_block_activities_deciding-which-car-loan-afford_worksheet.pdf
Note: Please remember to consider your students’ accommodations and special needs to ensure that all students are able to participate in a meaningful way.