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Car buying Project

To get all the credit in this project you must show all your calculations. If it does not fit in this worksheet you may use additional paper or you may get this in digital form so that you may expand it if needed. Neatness counts as 5 points of the grade. Please see attached rubric to get idea of what is expected.
Objective: You will:

  1. Create a budget to buy a car
  2. Estimate your monthly transportation expenses
  3. Calculate sale tax and property tax on the car.
  4. Pick an appropriate new car according to your budget.
  5. Investigate available loans and pick one that works for you
  6. Calculate your monthly car payment and the amortization table.
    Scenario:
    You just got a nice job that pays a yearly salary of $68,000 a year. It is time to get a new car and get rid of your old 2008 Ford Explorer.
    Budgeting:
    Use the budget in http://static.oprah.com/download/pdfs/money/money_pie_chart.pdf to figure out your transportation budget according to your salary.
    1) Yearly transportation budget according graph allocation and your new salary: (show calculations) 2) Change the yearly budget to a monthly budget:  
    Keep this number in mind as you pick your new car but remember that the cost of buying and owning a car includes:
    • Monthly loan payment
    • Annual property tax – according to your town. This site might be helpful to get the mill rate for your town http://www.ct.gov/opm/cwp/view.asp?Q=385976
    • Gas (do a guesstimation)
    • Insurance – paid monthly. If you are currently paying car insurance – use that value. If you do not have insurance you can do a google search to get an approximation of what someone your age would pay in CT. Do not give your personal information to anyone out there or you will get inundated with emails and calls.
    • Maintenance of the car (with a new car let’s assume this is a minimum of changing the oil and inspection)
    • Other – here you would include things like parking, car washes, tolls etc. We live in a place where parking is mainly free but people living in a city like NYC or Boston this gets to be a big chunk of their transportation budget

Trade-in:
You have an old car for trade in since you were unable to sell it on your own. It is a Ford Explorer Sport Utility 4D XLT 2008 4wd V6 4 Liter automatic (standard equipment) in fair condition with 185,000 miles.
Go to http://www.kbb.com/ (Kelly Blue Book website) and click on the “Car Values – trade-in and private party values " tab at the top of the page.
• Then pick trade in value ( not the instant cash offer)
• Fill in the information about your used car. – as given above
This is the trade in value the car dealer has agreed to offer you for your car – you will need this later.
3) Trade-in value: ____

Choose your new car:
• Next go to https://www.truecar.com/
• Pick Shop New. Pick a make. Then pick a model.
• Fill out the information below for the car of your choice.
To find out about car buying fees check https://www.edmunds.com/car-buying/what-fees-should-you-pay.html Assume the documentation fee is $490 and that there are no incentives on your car. Assume you are buying a popular model and you pay sticker price (MSRP). List and show all you calculations for taxes and fee (do not forget the destination fee ) totals.
4)
Maker:

Brand:

Features:

Sticker Price: Use MSRP

Fees ( at a minimum –list destination fee and documentation fee):

Total Selling price:


To get car loan

  1. Down Payment – even if the institution does not specify a requirement for a down payment let’s assume that a down payment is required. Make a decision of how much you are want to put as down payment. Explain your decision on the amount and where the money came from.

Now, it is time to find a bank loan. Go to https://www.bestcashcow.com/auto-loan-rates/
6)
Loan Length APR
3 years

5 years

  1. State which loan length you have chosen and why. Compare amount of money you would pay for both loans. If an institution requires a membership state check requirements and state how you can join.
  2. Now, calculate the amount of the loan you will need.
    • Loan amount = cost of car – (Down payment +Trade In).
    • Also calculate the amount of money that you will need before you can take possession of the car (down payment, taxes, and fees).
    • Show calculations.
    Total cost of car:
  • Trade-in
    Subtotal
  • CT State Tax (6.35%) Show Calc here : Subtotal
  • Down payment (this is up to you but down payment should be >0)

Loan Amount – what you will need to lend from the Bank

9) Calculate the following for your loan (show your work):
• PMT (monthly payment) Use loan amount in 6 as your principal and interest and years according to what you chose in 4

• Total cost of loan: (how much will you pay the bank at the end of the 3 or 5 years of your loan? It should include fees)

• Total interest paid on loan:

Amortization table for 1st year of car loan –
Here you can chose to do it by hand OR to do it in excel. If you do it in excel skip the table bolow and follow the directions for excel.

To do it by hand:
• fill out complete table,
• show your work for 1st three months in a separate piece of paper.
• use an amortization schedule calculator from the internet to fill out the rest of the table.
• Note that after the 3rd payment the table is asking for every 3 months.
10)

Payment number Interest Paid Principal paid Balance
1
2
3
6
9
12
15
18
21
24
27
30


11) Check if you stayed within your budget calculated on the first page:
Expense Calculation Total per month
Monthly loan payment Take from 5(c)

Annual property tax – town:

Gas (guesstimation)

Insurance – paid monthly

Maintenance

Other:

Monthly Total:  

12) Did you stay within your budget? (this will be your reflection for this project) Explain if you did – what helped you stay in budget and what could you do with the extra money. If you did not stay in budget – explain why and how you could fix your problem.

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