financing a vehicle
TRANSCRIPT
How a Financial Calculator Can Help Teens Make Deci$ion$ about Financing a Vehicle
20022002
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Marsha A. Goetting Ph.D., CFP®, CFCSMarsha A. Goetting Ph.D., CFP®, CFCS
Professor & Extension Family Professor & Extension Family Economics SpecialistEconomics Specialist
Department of Agricultural Department of Agricultural Economics & EconomicsEconomics & Economics
Have you wondered? Have you wondered? • What the monthly payment What the monthly payment
would be on your dream would be on your dream car? car?
Have you wondered? Have you wondered? • How much you would save How much you would save
in interest charges by in interest charges by increasing your payments increasing your payments amount?amount?
WorkshopWorkshop• You are going to learn how to You are going to learn how to
solve these & similar problems solve these & similar problems quickly & easily by using a quickly & easily by using a financial financial calculatorcalculator
Financial CalculatorFinancial Calculator• Texas Instruments Texas Instruments
BA-35 Solar Business BA-35 Solar Business AnalystAnalyst
• Cost: about $20 at most Cost: about $20 at most discount storesdiscount stores
IntroductionIntroduction•Getting Getting Acquainted with Acquainted with your Financial your Financial CalculatorCalculator
Turn on Turn on
MODEMODE
CE/CCE/C
2nd2nd CPTCPT AC/ONAC/ON
NN
XX 12 12
% i% i PMTPMTPVPV FVFV
1212
FixFix
Financial Mode Financial Mode
FinFin 0. 0.
• If If FINFIN is not lower left is not lower left cornercorner
• PressPress MODEMODE AC/ONAC/ONCPTCPT
Decimal Function Decimal Function
FINFIN 0.00 0.00
• PressPress 2nd2nd
2nd2nd
FixFix
CPTCPT 22
Clearing Screen/DisplayClearing Screen/Display
• Press key oncePress key once• Clears Display Clears Display
• Corrects Incorrect EntriesCorrects Incorrect Entries
• Clears word “Error”Clears word “Error”
CE/CCE/C
Clearing Financial Registers Clearing Financial Registers
• Press keyPress key Clears numbers in Clears numbers in
registers & displayregisters & display
NN %i%i PVPV PMTPMT FVFV
CE/C 2nd2nd
CMRCMR
CE/C
Finance KeysFinance KeysNN
% i% i
PMTPMT
Number of PeriodsNumber of Periods
Interest RateInterest Rate
Payment AmountPayment Amount
Finance KeysFinance KeysPVPV
FVFV
Present ValuePresent Value
Future ValueFuture Value
Compute keyCompute keyCPTCPT
LoansLoans• Calculate payment amount Calculate payment amount
for car loan when we know:for car loan when we know:• Amount borrowedAmount borrowed
• Interest rateInterest rate
• Length of loanLength of loan
Dream Car Dream Car • Finance Finance
$21,000 $21,000
• APR 6%APR 6%
• 5 year loan5 year loan
Car Car • Clear registers Clear registers 2nd CE/C CE/C2nd CE/C CE/C• Loan AmountLoan Amount 21,000 PV21,000 PV
• Periods Periods 5 x 12 = 60 N5 x 12 = 60 N• % Rate% Rate 6 6 12 = 0.50 %i12 = 0.50 %i• CPT PMT 405.99 CPT PMT 405.99 (don’t clear)(don’t clear)
Calculate Interest Calculate Interest•How much How much interest paid in 5 interest paid in 5 years?years?
Interest Paid Interest Paid • $405.99 payment$405.99 payment
• x 60 # periodsx 60 # periods
$24,359.33 paid $24,359.33 paid
- 21,000.00 car cost- 21,000.00 car cost
Interest Paid Interest Paid
•$3,359.33 $3,359.33 interest interest paid over 5 yearspaid over 5 years
Cheaper Wheels Cheaper Wheels • Finance Finance
$15,500$15,500
• APR 5.8%APR 5.8%
• 5 year loan5 year loan
Cheaper Wheels Cheaper Wheels • Clear registers Clear registers 2nd CE/C CE/C2nd CE/C CE/C• Loan amountLoan amount 15,500 PV15,500 PV
• Periods Periods 5 x 12 = 60 N5 x 12 = 60 N• % Rate% Rate 5.8 5.8 12 = 0.50 %i12 = 0.50 %i• CPT PMT 298.22 CPT PMT 298.22 (don’t clear)(don’t clear)
Calculate Interest Calculate Interest• How much interest How much interest paid in 5 years?paid in 5 years?
Interest Paid Interest Paid • $298.22 payment$298.22 payment
• x 60 # periodsx 60 # periods
$17,893.14 paid $17,893.14 paid
- 15,500.00 car cost- 15,500.00 car cost
Interest Paid Interest Paid
•$2,393.14 $2,393.14 interest paid interest paid over 5 yearsover 5 years
Affordable Payments • Anthony Anthony
• Monthly payment $200Monthly payment $200
•How expensive of a car How expensive of a car can he AFFORD?can he AFFORD?
If… • 5 year loan 5 year loan
• Interest RateInterest Rate•4.5%4.5%
Affordable Car??? Affordable Car??? • Clear registers Clear registers 2nd CE/C CE/C2nd CE/C CE/C• Payment Payment $200 PMT $200 PMT
• Periods Periods 5 x 12 = 60 N5 x 12 = 60 N• % Rate% Rate 4.5 4.5 12 = 0.38 %i12 = 0.38 %i
• CPT PVCPT PV 10,727.88 10,727.88
Summary = $200 PMT • 5 year loan5 year loan
• 4.5 Interest rate4.5 Interest rate
• Affordable Loan =Affordable Loan =• $10,727.88$10,727.88
Affordable Payments • Susie = $300 monthlySusie = $300 monthly
• How expensive of a car How expensive of a car can she AFFORD?can she AFFORD?
Affordable Car??? Affordable Car??? • Clear registers Clear registers 2nd CE/C CE/C2nd CE/C CE/C• Payment Payment $300 PMT $300 PMT
• Periods Periods 5 x 12 = 60 N5 x 12 = 60 N• % Rate% Rate 6.5 6.5 12 = 0.54 %i12 = 0.54 %i
• CPT PVCPT PV 15,332.60 15,332.60
Summary = $300 PMT • 5 year loan5 year loan
• 6.5 Interest rate6.5 Interest rate
• Affordable Loan =Affordable Loan =•$15,332.60$15,332.60
How Long to Pay Off? • Tracy Tracy
•Afford $180 paymentsAfford $180 payments
•Cost of car $15,430Cost of car $15,430
•Interest rate 7.2%Interest rate 7.2%
Car $15,430Car $15,430• Clear registers Clear registers 2nd2nd CE/CCE/C CE/CCE/C• Credit balanceCredit balance 15,430 PV15,430 PV
• % Rate% Rate 7.2 7.2 12 = 0.60 %i 12 = 0.60 %i
• Payment Payment 180 PMT180 PMT
• CPT N 120.73 monthsCPT N 120.73 months
• 12 =12 = 10.06 years 10.06 years
Who would finance? Who would finance?
• Dealer--NoDealer--No
• Corporation--NoCorporation--No
• Mom & Day--MaybeMom & Day--Maybe
Alternatives: Alternatives: • Save for biggerSave for bigger
down paymentdown payment
• Find less expensive carFind less expensive car
• Get another jobGet another job
How Long to Pay Off? • RyanRyan
• Afford $230 paymentsAfford $230 payments
• Cost of car $19,500Cost of car $19,500
• Interest rate 6.6%Interest rate 6.6%
Car $19,500Car $19,500• Clear registers Clear registers 2nd2nd CE/CCE/C CE/CCE/C• Credit balanceCredit balance 19,500 PV19,500 PV
• % Rate% Rate 6.6 6.6 12 = 0.55 %i 12 = 0.55 %i
• Payment Payment 230 PMT230 PMT
• CPT N 114.48 monthsCPT N 114.48 months
• 12 =12 = 9.54 years 9.54 years
Who would finance? Who would finance?
• Dealer--NoDealer--No
• Corporation--NoCorporation--No
• Mom & Day--MaybeMom & Day--Maybe
How a Financial Calculator Can Help Teens Make Deci$ion$ about Financing a Vehicle
20022002