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Deciding which car and car loan you can afford

Updated

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 of 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 car purchase possibilities and make a reasonable decision given the information provided.

  • Reflect on ways to establish responsible loan practices.