# Pre-Algebra: Financing a car loan

1) What 3 factors influence the amount of a car payment?

2) What does amortization mean?

3. Write the following percents as decimal numbers:
a. 12 %
b. 8 %
c. 6 1/2 %
d. 11 1/2 %
e. 8.65 %
f. 10.2 %

4. Convert the following years to months:
a. 5 years
b. 4 years
c. 3 1/2 years
d. 2 1/2 years
e. 2 years

Use the TI-82 Car Payment Program to help you determine the following:

Car Cost Down Payment Amount Financed Annual Interest Rate Length of Payments Monthly Payments Total cost of Payments Final Cost of car Financing charge
3) \$16,000 \$0 . 8% . . . . .
4) \$16,000 \$2,500 . 8% 5 years . . . .
5) \$16,000 \$2,500 .6.5% 48 months . . . .
6) \$16,000 \$2,500 . 6.5% 60 months . . . .
7) \$16,000 \$6,000 . 9.2% 3 years . . . .
8) \$16,000 \$6,000 . 5.5% 26 months . . . .

11. Compare the results of problems 5 and 6 above. (Compare payment, total cost, and finance charge)

12. Compare the results of problems 7 and 8.

13. Compare the results of problems 9 and 10.

14. What happens to the payment and financing charge if everything stays constant except the interest rate goes up?

15. What happens to the payment and finance charge if everything stays constant except the length of time increases?

16. What happens to the payment and finance charge if everything stay constant except the amount financed increases?

17. What are the determining factors in choosing one payment plan over another?

A car dealer offers two special deals.

Option 1: You can purchase a car for \$13,500; receive \$1500 cash back (which you would use as a down payment) and the interest rate would be 9.5%. (Time period is 4 years)

Option 2: You can purchase a car for \$13,500; receive no cash back, finance the whole amount, and the interest rate would be 2.1%. (Time period is 4 years)

10) Determine which of these plans you would choose. Explain your choice completely.

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