8 3 Installment Buying Installment Buying basically means

8. 3 Installment Buying

Installment Buying basically means you take out a loan to purchase some product or service: Home Car Credit Card (Visa, Master. Card, 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.

You purchase a new car for $19, 000. You pay 10% down, and your payments are $375 a month for 60 months. • Compute the down payment, amount financed, total installment price, and 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. kbb. com – www. edmunds. com Can find current prices, customer and professional reviews, and information on financing, leasing, and insurance.

Practice • Page 450, #1 -4