The Process You will be walked through each step in this process. Press space bar to continue.

Your Budget Remember, you make $5,000 per month. Work independently. If you have lost yours, print budget worksheet (Click “monthly budget” below) Fill out the monthly budget form. Calculate percentages and complete the table. Answer question about adjusting your budget. This may help you later.

Now that your worksheet is completed, you know how much you can afford to spend each month on your car payment. We’re one step away from shopping!

Before you start shopping We are getting ready to go to the dealership! First, a few terms. What is an auto loan? Once you choose the car, you will have to take out a loan. An auto loan is when you borrow money from a bank to buy a car. Yes, you have to pay it back. You can choose a 3-year loan, where you agree to pay the bank back within 3 years. You can choose a 5-year loan or a 6-year loan, in which you agree to pay the bank back within 5 or 6 years. The 3-year loan is called a short-term loan. The 5 and 6-year loans could be considered longer-term loans because you will take longer to “pay them off.” Some long term loans, like a loan to buy a house, can take as long as 30 years or more to pay off.

Auto Dealership You are now ready to go shopping online! For this activity we will go to the Roseville Automall in Roseville, California. There you will choose the dealership you’d like to visit. Press space bar to see how to navigate the Roseville Automall website. If you feel ready, you may skip this step.

By clicking the Roseville Automall link, you will come to the the home page above. Click on the dealership you would like to visit. For this example, we will choose the Ford dealer. See icon and cursor above. Press space bar to continue.

Cick “New Inventory” as shown above Press space bar to continue

Scroll. You can click on the car’s images to learn more about each car. You might want to bookmark the page after you have chosen the car you’d like to buy. Ask a partner or teacher if you don’t know how to bookmark a web page. Press space bar to continue.

Remember when we talked about loans? Well, now it is time to go loan shopping! Remember, you’re choosing between a 3-year loan, a 5-year loan, or a 6-year loan. If you have lost yours, download your loan accounting sheet. Click on the “loan accounting” link. Using the Simple Interest formula fill out the table on the loan accounting sheet. Press space bar to continue

Notice how your loan accounting table lists interest rates? What is an interest rate? An interest rate is a percentage of the amount that you borrowed. Banks want you to pay back the money you borrowed, plus an extra amount of money called “interest”. There are different ways to calculate interest which we will not go into here. An interest rate of 5% is lower than 6% or 7%. Therefore you will have to pay less money to the bank if you take a loan with a lower interest rate. For a 3-year loan, put in 5% as your interest rate. Put 6% for a 5-year loan and 7% for a 6-year loan. Notice the trend? Press space bar to continue

Don’t forget to answer the questions: What trends do you see in interest rates, comparing the three kinds of loans? What can you conclude when comparing interest rates as the term (length of time) of the loan increases?

Answer questions on page 2 of the loan accounting worksheet.

Analyze Think about the information you have obtained. Can you afford the monthly payments? Do you have to go back and change something in your budget? For example you could take, say, 2% away from your clothing budget, and put it toward your car payment. But you would have to stop spending as much on your clothes. You could take, say, 5% from your entertainment expenses and add it to your car payment, but you would have to give up some of your entertainment (movies, new video games, etc.). Or, you could choose a less expensive car. What kind of loan will you choose? Time to decide and sign some contracts!