8.3 Installment Buying. Installment Buying basically means you take out a loan to purchase some product or service: Home Car Credit Card (Visa, MasterCard,
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Presentation on theme: "8.3 Installment Buying. Installment Buying basically means you take out a loan to purchase some product or service: Home Car Credit Card (Visa, MasterCard,"— Presentation transcript:
Installment Buying basically means you take out a loan to purchase some product or service: Home Car Credit Card (Visa, MasterCard, American Express, Discover) Furniture Appliances Electronics Home Improvements or Remodeling – new roof, deck, garage, etc.
Vocabulary Down Payment – partial amount paid up front in cash for a product or service Amount Financed = Cash Price – Down Payment This is the amount you are borrowing Total Installment Price – the sum of all the monthly payments and the down payment Finance Charge – the interest on the installment loan Finance Charge = Total Installment Price – Cash Price
You purchase a new car for $25,000. You pay $3,000 down, and your payments are $425 a month for 60 months. Compute the down payment, amount financed, total installment price, finance charge.
See chart on page 443 Helps you figure the payment based on the interest rate and the number of monthly payments. Most lenders will give you some kind of chart like this, or will tell you how much you payment is per $1,000 financed.
Example: On a new car loan, the monthly payment for 60 months is $18.94 per $1,000 financed Determine the monthly payment for these vehicles: 2011 Mustang: $32,000 2009 Camry: $14,000 2011 F-150: $37,000 2011 Porsche: $84,000
See Blue Box on Page 449 The Dark Side of Credit Cards The average APR is a steep 18.84% and increasing each year. Half the credit card companies charge a late fee of more than $18. Some companies charge a fee for NOT USING your card during a 6-month period. Some companies charge a fee if you cancel your account. In addition to the interest and other fees, some companies charge an annual fee just for having the card.
Buying a Car Good websites for research – www.cars.com www.cars.com – www.kbb.com www.kbb.com – www.edmunds.com www.edmunds.com Can find current prices, customer and professional reviews, and information on financing, leasing, and insurance.