Vehicle Financing Vocabulary
What is a Down Payment?
The money you pay upfront before financing the rest of the vehicle.
Car Price = $18,000
Down Payment = 10%
How much is the down payment?
$1,800
Which loan costs less?
A. 4%
B. 9%
4%
Monthly Payment = $420
How much is paid in 12 months?
$5,040
Which option is better?
Pay Cash
OR
Finance at 12%
Pay Cash
What is a Monthly Payment?
The amount of money you pay every month until the loan is paid off.
Car Price = $26,000
Down Payment = 15%
How much do you pay today?
$3,900
A person has a poor credit score.
Will their monthly payment usually be:
A. Lower
B. Higher
Higher
Monthly Payment = $535
Loan = 60 months
How much will you pay?
$32,100
Which costs more over time?
A vehicle with:
11%
What is a Lease?
A contract that allows you to drive a vehicle for a certain period while making monthly payments, but you do not own the vehicle.
Car Price = $34,500
Down Payment = 20%
How much is financed?
Down payment = $6,900
Financed = $27,600
A bank offers:
Loan A = 5%
Loan B = 8%
Both cars cost exactly the same.
Which loan saves more money?
Loan A
Vehicle Price = $32,000
Down Payment = $6,000
Monthly Payment = $480
60 Months
How much do you pay altogether?
480 × 60 = $28,800
Total = $34,800
Why should you compare financing offers from different banks?
Because different lenders offer different interest rates and monthly payments, which affects the total amount paid.
What is a Credit Score? Why is it important?
A credit score measures how responsible someone is with borrowed money. A higher credit score usually helps you qualify for lower interest rates and lower monthly payments.
Vehicle Price = $41,000
Down Payment = 25%
Calculate:
• Down payment
• Financed amount
Down Payment = $10,250
Financed = $30,750
True or False
A larger down payment usually lowers the monthly payment.
True
Car Price = $29,000
Down Payment = 15%
Calculate:
Down payment = $4,350
Financed = $24,650
Which person will probably spend LESS money?
Person A
Good Credit Score
5% Interest
Person B
Poor Credit Score
11% Interest
Person A
What is an Interest Rate?
The percentage the lender charges for borrowing money.
You paid $5,000
The vehicle costs $25,000
What percentage did you pay?
20%
Explain 1 reason why someone should improve their credit score before buying a car.
Tesla Price = $43,000
Down Payment = 20%
Monthly Payment = $620
72 Months
Calculate:
• Down payment
Down Payment = $8,600
A car costs $30,000
Option A
Down Payment = $6,000
Interest = 4%
Option B
Down Payment = $2,000
Interest = 10%
Question
Which option is the better financial decision?
Option A,