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    COMPARE: Auto Loans: NGPF Activity Bank Types of Credit

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    COMPARE: Auto Loans: NGPF Activity Bank Types of Credit

    Uploaded by

    jamaibtihaj
    38 views4 pages

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    38 views4 pages

    COMPARE: Auto Loans: NGPF Activity Bank Types of Credit

    Uploaded by

    jamaibtihaj

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    NGPF Activity Bank

    Types of Credit
    Spanish Version

    COMPARE: Auto Loans


    Molly is celebrating her amazing new career and wants to upgrade her junky old car for a shiny new
    Volkswagen Jetta. She heads to Volkswagen’s website and sees the following financing deals:

    Note: For this activity, assume


    Molly’s going to pay the exact
    MSRP of $24,790. This is most
    likely NOT true, but we’ll use it for
    simplicity.

    Part I: 0% APR sounds PERFECT!

    Answer the following questions using the details from the 0% APR offer above. Please round all answers to
    the nearest dollar.

    1. Molly has a $2500 down payment saved for this purchase, and the dealer’s $1500 Cash Allowance will
    come straight off her total. How much loan does Molly need?

    2. How much will Molly’s monthly payment be if she makes 36 monthly payments?

    www.ngpf.org Last updated: 4/7/22


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    3. How much total interest will Molly pay using this plan?

    4. When Molly adds all her payments, how much will the car cost her?

    Part II: Maybe the 1.9% is more manageable?

    Oh, boy! Look at that monthly payment from Question 2 above! Molly cannot afford the monthly payment
    using the 0% financing. She opens up Bankrate’s Loan Calculator to see how much she’d pay with the other
    financing option.

    5. Remember that Molly has a $2500 down payment saved for this purchase. The dealer will take the
    $500 Cash Allowance straight off her total. How much loan does Molly need?

    6. Using the Loan Calculator and the 1.9% APR offer, how much will Molly’s monthly payment be?

    7. How much total interest will Molly pay using this plan?

    8. When Molly adds all her payments, how much will the car cost her using this plan?

    Part III: Reading the Fine Print

    Excited to buy her dream car, Molly rushes into her local Volkswagen dealership. Molly picks out a car, sits
    down at the financing desk, and hears the following:

    “Well, we ran your credit history. You’ve got a really thin file -- just a year’s worth of student loan
    payments. The deal you saw was for ‘well qualified buyers.’ The best deal we can offer you is 6.6% for
    60 months. A little more bad news -- the cash allowance is also based on credit history, so you don’t
    qualify for $500. That said, you’re excited about a Volkswagen, and I want to see you driving one, so I
    can do $400 for you!”

    www.ngpf.org Last updated: 4/7/22


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    9. Molly still has a $2500 down payment. How much loan does Molly need?
    $24390

    10. How much will Molly’s monthly payment be using the Bankrate calculator?
    $478.36

    11. How much total interest will Molly pay using this plan?
    $4,311.70

    12. When Molly adds all her payments, how much will the car cost her?
    $28,701.7

    Part IV: In Summary

    13. What valuable lessons did Molly learn about auto financing?
    With a lower interest rate, you will likely have a higher monthly payment. But if you have a lower
    monthly payment, you will likely have a higher interest rate. Also if you don’t have a good line of
    credit you may not get a lower interest rate.

    14. Molly desperately wants a Volkswagen Jetta, and this new monthly payment is pretty high again.
    What suggestions do you have for making her dream become reality?
    Either, wait a few years until you have the line of credit and income to be able to pay the monthly
    payment, or you could budget wisely and buy the car now.

    www.ngpf.org Last updated: 4/7/22


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    www.ngpf.org Last updated: 4/7/22
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